FTSE 100-listed used car broker Auto Trader Group PLC (LSE:AUTO) impressed with its full-year results, but with shares revving up to an all-time high, some analysts reckon the valuation tank is full for now.
Peel Hunt attributed Auto Trader’s robust revenue beat to strong growth in the core classifieds business, praising “a strong set of results despite ongoing macro uncertainties, which is a testament to the group's resilient model”.
However, with shares trading at a 23 times forward price-to-earnings (PE) ratio, “we believe the valuation is full”. As a consequence, the bank has a hold rating on the stock.
Shore Capital Markets also recommends holding off for now, though its 731p price target is more bullish than Peel Hunt’s 680p target.
Autorama concerns
However, Shore Cap pointed out some operational concerns, particularly with vehicle leasing marketplace Autorama which Auto Trader purchased in 2022.
Autorama recorded an operating loss of £8.8 million, Shore Cap pointed out.
Nonetheless, "We are pleased to note the resilient performance and progress described in this morning’s release and continue to regard AUTO as a high-quality company with strong growth prospects and attractive financial characteristics rooted in a robust business model and strong commercial and consumer proposition", Shore Cap stated.
UBS took a more cautious stance, assigning a 'sell' rating to Auto Trader stock with a target price of 655p. UBS also highlighted Autorama as a concern, alongside Digital Services Tax (DST) headwinds.
"Overall a strong core performance in FY24 expected to continue in FY25 is clearly positive; however, niggles remain," UBS remarked.
Shares in Auto Trader flew 12.6% higher to 822.8p following its full-year results.