Deutsche Bank has reiterated its 'buy' rating on Rightmove PLC (LSE:RMV) but cut its price target from 927p to 732p after the property portal spooked investors by pushing back its growth targets and announcing a fresh investment drive.
The shares fell sharply, closing at 563.4p, as the market digested what the broker described as “a double whammy” of disappointing news.
Analyst Gareth Davies said that managing expectations around missing the 2028 goals set out at the 2023 capital markets day would have been difficult enough on its own.
Combining that with plans for extra investment and shifting the timeline for accelerated growth to 2030 made the sell-off unsurprising, particularly given the current excitement around artificial intelligence stocks that has drawn money elsewhere.
The company’s decision to increase spending has prompted a downgrade to margin forecasts, with Deutsche Bank now modelling a drop from 70% to 67%.
Even so, Davies said the additional investment, estimated at around £60 million, should be viewed in context. Rightmove generates more than £200 million of free cash flow each year, giving it plenty of capacity to fund expansion while maintaining financial flexibility.
The broker’s view is that management and the board are acting in the long-term interests of the business.
The additional spending is aimed at strengthening Rightmove’s position and capturing future growth opportunities, rather than simply defending its current model.
Although the near-term earnings impact will be felt, Deutsche does not believe the fundamentals have deteriorated.
As Davies put it, “Rightmove has not become a bad business overnight.” The company remains highly cash generative, enjoys market-leading margins, and continues to dominate its sector.
The market reaction may therefore be more emotional than rational, reflecting disappointment rather than a change in the underlying story.
With its new 732p target, Deutsche Bank still sees significant upside from current levels. Investors, however, will need to look past the short-term noise and focus on whether the additional investment ultimately delivers stronger and more sustainable growth beyond 2030.