Rightmove's price rises come up against agent woes, Berenberg says
Rightmove’s fees are likely to come under pressure as struggling estate agents become unwilling to swallow price increases, Bereberg analysts said.
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Berenberg cut its rating on Rightmove shares to ‘buy’ from ‘hold’ and cut its price target to 4,100p from 4,150p.
Rightmove’s customers are estate agents that pay to display properties on the site. Those agents are feeling the heat from a stagnant housing market and pressure on margins from hybrid competitors and an oversupply of agents.
A new letting fee ban from 2019 will add to their woes. The government’s estimate of a £10,000 annual cost per agent is about the same as a Rightmove subscription, the Berenberg team, led by Robert Berg, said.
All this is happening as Rightmove tries to shift its revenue growth towards price increases for its estate agent customers – a risky plan, Berenberg said.
“We have for some time been of the view that a business model so reliant on price increases is ripe for disruption,” the analysts said. “Clearly, Rightmove has built a position whereby it has strong pricing power and highly recurring revenues … However, with traditional agents margins under pressure from a whole host of structural factors, macro uncertainties and increasing competitive pressures we believe the current share price and consensus estimates fail to appropriately reflect reality.”