Auto Trader Group PLC’s (LON:AUTO) dominance in the UK used car classifieds market is “unchallenged and unlikely to change” in light of the competition investigation launched last week, analysts at Liberum Capital said in a note on Tuesday.
The announcement by the Competition & Markets Authority (CMA) “should not cause major issues”, the City broker's number crunchers said, upping their share price target for the FTSE 100-listed firm to 640p from 620p and reiterating a ‘buy’ rating.
READ: Auto Trader downgraded by UBS due to 'limited potential upside' and risk of no-deal Brexit
Last week, the CMA launched a probe into the digital economy and said a new regulator might be needed to police the growing power of digital platforms.
But Liberum's analysts pointed out that this probe seems to be more targeted at the US online giants such as Google and Facebook than the local classified players, “which may actually help" Auto Trader.
They pointed out that the car-reseller company’s market share is five times that of the next player, Gumtree and as the leader in the market, Auto Trader “benefits from strong virtuous circle effects and very high barriers to entry”.
Following June’s results, Liberum’s analysts said they now expect average revenue per retailer growth to be at the 9-10% level in coming years as both new products and increased take-up of premium services drive growth, with basic price increases limited.
Auto Trader shares, which had slumped to a three-month low below 540p around the time of the CMA announcement, were little moved on Tuesday at 552.4p.