Auto Trader Group PLC (LSE:AUTO) shares fell sharply on Thursday, dropping 14% after its annual results showed a clear slowdown in key growth areas.
The decline dragged other FTSE 100 digital names lower, including RELX PLC (LSE:REL) and Rightmove PLC (LSE:RMV), as investors took a more cautious view of online platform stocks.
The automotive marketplace reported a 5% rise in full-year revenue to £601.1 million, with core business income up 7% to £564.8 million.
Retailer revenue and average revenue per retailer both rose 7% and 5%, respectively, but the pace of growth slipped in the second half.
Car stock on forecourts edged just 1% higher, compared with 2% growth in the first half, and operating profit growth slowed to 8%, down from 14% earlier in the year.
Leasing losses narrow
Autorama, its vehicle leasing platform, narrowed losses to £4.3 million, although revenue fell 12%.
The company also absorbed a £10.2 million charge linked to the UK’s Digital Services Tax for the first time.
Despite launching a new AI toolset called Co-Driver and guiding for a pickup in growth later this year, investors were underwhelmed. The share price drop wiped out nearly all gains made in 2025 to date.
However, the results slightly missed Peel Hunt’s expectations, with both revenue and earnings per share coming in about 1% light. Net cash stood at £15 million, compared to net debt of £11 million last year, though this was £3 million below forecasts.
Autorama disappoints
The broker noted that although Autorama’s revenue fell more than expected, its losses were smaller, which helped cushion the overall result.
Peel reiterated its 'hold' rating and said it expects a 5% downgrade to its 2026 earnings forecast.
The reason? Ironically, it's Auto Trader's success in selling cars quickly that is creating a headwind.
When cars sell faster, dealers have fewer vehicles listed on the platform at any one time, which limits the growth of subscription income from retailers.
This effect, described by Peel Hunt as a “stock lever” being marginally down, is expected to weigh on next year’s earnings.
For 2026, management expects pricing initiatives to contribute £90–100 to ARPR, while stock will contribute £70–80. Core operating margins are expected to hold at 70%, with Autorama’s losses reducing further in line with market expectations.
'Full' valuation, so little room for disappointment
Still, with the stock trading on 25 times next year’s expected earnings and up 14% year-to-date before Thursday’s fall, Peel Hunt described the valuation as “full” and the near-term outlook as cautious.
Auto Trader is banking on new tools like its Co-Driver AI suite and product enhancements to support growth into 2026. But for now, investors appear focused on the pace of growth cooling and what that means for the company’s premium rating.
The stock fell 110p to 789.2p, while RELX was off 3% and Rightmove was down 2%.