Deutsche Bank has nudged up its price target for property listings web site leader Rightmove PLC (LON:RMV) to reflect rising earnings multiples in the sector.
Having said that, with almost 80% market share, Rightmove practically is the sector. The share price took a knock when the chief executive officer announced his intention to move on, dropping below 4,000p, and with Deutsche Bank’s (DB) price target only moving up to 3,880p from 3,720p, its recommendation remains ‘hold’.
It has trimmed its earnings forecasts following the recent results to reflect the lower number of estate agents on the system.
“2016 results were broadly in line with our estimates at the group level. The Agency segment was slightly weaker. We cut the growth rate for number of estate agents from +2% to -0.3% in 2017 and to flat in 2018,” DB said.
Its earnings per share forecast for the current year is trimmed by 2% and next year’s forecast moves down 4%.
Aussie finance house Macquarie also thinks Rightmove is fairly valued; its 12-month price target is cranked up to 4,034p from 3,789p.
It was impressed by the turnaround in average revenue per agent, which gives it greater confidence in the company’s ability to sustain high growth. As a result Macquarie’s 2017 revenue forecast is hiked by 5%.
Liberum thinks the recent share price decline throws up a buying opportunity, and reckons that the new chief executive (CEO), Peter Brooks-Johnson, will prove an able replacement, given he has been with the company since 2006 and has been the chief operating officer (COO) since 2013.
“This appointment of Mr Brooks-Johnson is consistent with how Rightmove progress management internally through the company and is similar to how Mr. McKittrick became CEO after he had been COO for a number of years prior to being appointed to the top role. Mr. Brooks-Johnson commented at the FY'16 results presentation that he had been a major part of writing of the business strategy for the previous six years and that there would be no significant change to the current strategy of the business,” Liberum noted.
Liberum’s price target is a punchy 5,000p.
A slightly dissenting voice is Barclays, which recommends its clients be underweight in Rightmove.
The imminent departure of the very successful CEO, Neil McKittrick, creates uncertainty, while the small decline in the number of estate agents on Rightmove’s books in the second half of last year could prove to be “an inflection point to focus on”.