JPMorgan has a cautious view on Auto Trader Group PLC (LSE:AUTO), warning that the online car marketplace faces a “challenging road ahead” as FY26 results leave the company needing to rebuild momentum from a low base.
Analyst Lara Simpson kept an Underweight stance on the stock, arguing that while key performance indicators improved through April and May, the recovery path into FY27 looks “back-end loaded and operationally demanding”.
The central issue, according to JPM, is whether Auto Trader’s average revenue per retailer, or ARPR, can keep doing the heavy lifting.
Retailer behaviour is becoming a more immediate concern, with dealers moderating paid stock and package spend as profitability pressures intensify. That clouds near-term ARPR momentum, particularly as vehicle supply is only gradually improving and the speed of sale remains quick by historical standards.
JPM also pointed to a lingering overhang from Deal Builder, which it said has heightened churn sensitivity and contributed to weaker retailer sentiment and relationship risk heading into FY27.
“Little room for error” remains the message as Auto Trader tries to rebuild engagement while protecting pricing power.
The broker acknowledged that valuation looks less demanding after the share price derating, with Auto Trader trading on 8.4 times FY27 estimated EV/EBITDA versus peers on 11.2 times.
But JPM argued the discount still does not fully reflect a structurally slower growth profile, forecasting 5% compound annual growth between FY27 and FY29 against 10% for peers.
It added that a back-end loaded recovery, execution risk and the ongoing CMA regulatory overhang are likely to keep the risk premium elevated.