After a freaky Friday that saw the stock tumble almost 30% at one point, Rightmove PLC (LSE:RMV) shares were on a more even keel on Monday (down around 0.8%).
However, its decision to ramp up investment in artificial intelligence (AI) appears to have divided City opinion.
The post-mortem saw UBS and RBC Capital downgrade their calls from ‘buy’, while Panmure Liberum took the contrarian route and upgraded to the same rating.
Although the junior of the trio, Panmure’s take seems to be that the stock has been oversold at these levels.
“With the second investment programme in two years, the shares are now discounting a scenario behind even our cautious forecasts,” its morning note to clients observed.
Rightmove is valued at about 18.6 times its yearly profit and roughly 13.7 times its operating earnings before interest and tax: levels that might look a touch pricey for an ordinary business.
But Rightmove isn’t your standard outfit; it’s classed as a tech play, soon to be an AI tech play. By that logic, a near-19-times multiple looks positively modest, or so the story goes.
Of course, logic and valuation discipline often go missing when investors chase the next big thing.
Otherwise, how else would Palantir command a price tag equal to 137 times its sales?
No diss intended toward the tech bulls at Panmure, just an observation on how frothy valuations can get.
The truth is, by US tech market standards, Rightmove’s current rating looks almost a bargain. And let’s face it, the UK has always been a little curmudgeonly about embracing the new and the bold.