Online consumer portals Rightmove PLC (LSE:RMV) and Auto Trader Group PLC (LSE:AUTO) got a less-than-inspiring write-up from analysts at JP Morgan, with the broker opting to keep both on 'underweight' ratings.
The analysts described the companies' respective growth rates as less compelling amid the fast-changing AI-driven environment.
The rise of generative AI is seen as disrupting the network-effect model that has underpinned the profitability of the online classified subsector over the past decade.
Incumbents like Rightmove and AutoTrader must now invest heavily to maintain traffic leadership and deliver high-quality, as well as develop AI-enhanced user experiences, according to the JP Morgan team.
“We argue that incumbents will have to materially increase their efforts to maintain their gatekeeper position by delivering undisputable, top-notch, now AI-driven search experiences and relevant information to compete with genAI agents and new aggregators,” the American bank's analysts said in a note.
Increased technology and advertising costs are only partly offset by AI-related efficiencies, they added.
And so, even after recent share price falls, the broker sees further downside risk across much of the sector.