UBS ups Rightmove to 'buy' after selloff
Rightmove got a boost on Monday as UBS upped the stock to 'buy' from 'sell' following the recent selloff.
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UBS said the selloff - which saw the shares drop significantly since the June 2018 peak post the Silverlake bid for ZPG - was overdone.
"Rightmove shares reached a peak of £5.35 post the Silverlake acquisition of ZPG. Since then, they have fallen by 20%. In our view, this has created an opportunity to buy into an asset with significant pricing power and defensive characteristics at a reasonable valuation."
UBS said the decline in the share price reflects concerns that weakness in the UK property market could impact Rightmove revenues and that the company's dominant position could be at risk given new ownership of its competitors Zoopla and On The Market, and their partnership with Facebook.
The bank argued that features of Rightmove’s model protect it from concerns over Brexit and competition.
"Specifically, 1) Rightmove operates a subscription model that is not sensitive in the short term to transaction volumes and prices. 2) We think vendors will rarely award instructions to agents who do not use Rightmove, and 3) Rightmove’s products are fully integrated with agent workflow and designed to increase share of instructions, a key agent KPI."
As a result, it expects the company to deliver a circa 8% top-line and 12% earnings per share FY18-21 compound annual growth rate.
UBS has a 490p price target on Rightmove, whose shares were up 3% to 434.80p at 1115 BST.