Auto Trader Group PLC (LON:AUTO) shares skidded slightly on Friday after Citi downgraded the stock to ‘neutral’ from ‘buy’ after a strong performance in the share price.
In a note, the investment bank maintained that the FTSE 100 car marketplace was “a high-quality asset, operating in an attractive competitive landscape” in which it the “clear leader”, however after an impressive year for the share price, which has risen 55% in the last 12 months, analysts said the risk/reward profile was now “more balanced” and raised their target price to 580p, the stock’s Thursday close price, from 494p.
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“The bulls may still argue that Auto Trader is an attractive asset to a potential private equity buyer and we’d tend to agree. But we worry that the potential premium to the current share price may be getting narrower, and so we can’t justify putting fresh money into the stock here.”
Despite the downgrade, Citi added there could be some remaining upside potential from a joint venture between Auto Trader and vehicle services group Cox Automotive UK to set up Dealer Auction, a digital marketplace for wholesale vehicles, which as announced in January.
In lunchtime trading, Auto Trader shares were 0.8% lower at 576p.