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UBS pumps the brakes on Auto Trader with downgrade to ‘neutral’ following strong share performance

Published: 11:23 04 Sep 2018 BST

Car lot
UBS added that Auto Trader’s joint venture with Cox Automotive UK added 15p to its discounted cash flow valuation

Swiss bank UBS has downgraded FTSE 250 car retailer Auto Trader Group PLC (LON:AUTO) to ‘neutral’ from ‘buy’ following a strong performance in the share price since its full-year results in June.

Analysts at the bank, who also lifted their target price for the firm to 445p from 425p, said their +8% average revenue per retailer (ARPR) growth outlook for the 2019 and 2020 financial years “appears secure”, although they added that there was limited visibility on adjacent opportunities such as transactions, new cars, and insurance, which meant they saw “limited catalysts short term”.

READ: Auto Trader partners with Cox Automotive to launch new wholesale vehicle marketplace

In its full-year results on 7 June, Auto Trader had reported that pre-tax profits had risen 10% to £210mln in its full-year results, with revenues rising 7% to £330.1mln, while also upping its final dividend to 4p from 3.5p the previous year and sending its share price shooting up 8.7% on the day.

UBS also said that Auto Trader’s joint venture with Cox Automotive UK to create an online marketplace for wholesale vehicles, announced in mid-August, added 15p to its discounted cash flow valuation of the company’s shares, valuing the joint venture at £290mln.

In late-morning trading Tuesday, Auto Trader shares were down 2% at 442.4p.

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