Rightmove PLC (LSE:RMV) has seen its price target pared by Credit Suisse after recent news of impending changes at the top at the property portal operator.
That being said, the cut – to 618p from 650p – is down to an adjustment in the discount period in the broker’s discounted cash flow-based valuation and also baking in a bit more macroeconomic uncertainty into projected cash flows.
Nevertheless, the decision by Rightmove's current chief executive officer Peter Brooks-Johnson to step down in February of next year comes at a critical juncture for the industry, Credit Suisse believes.
“We have talked at length about the structural forces that are leading to a pivot in business models within the European Classified industry. Other classified players (AUTO/G24/ADEV) have been vocal and active in value chain expansion; however, this has come at a cost – namely profit downgrades or cash depletive M&A (capital that otherwise would be used for positive corporate actions),” the broker said.
“We do not believe RMV [Rightmove] is an exception to this well-evidenced and ongoing trend; as such, we see a change in management at this juncture as noteworthy. We believe an externally-appointed successor, with perhaps a ‘less orthodox’ background, could speak to the direction of RMV’s strategy,” Credit Suisse said.
Rightmove currently trades at 552.8p, down 1.0% on the day and 65.2p below Credit Suisse’s target price – but not far enough below to persuade the Swiss firm to change its neutral view on the stock.