Citi maintains Buy on Auto Trader, price target at GBP9.46

Friday, Citi analysts reiterated their Buy rating on Auto Trader Group PLC (AUTO:LN) (OTC: ATDRY) with a steady price target of GBP9.46. The company, which boasts a perfect Piotroski Score of 9 according to InvestingPro, announced fiscal year 2025 revenues and adjusted operating profit marginally below consensus by approximately 1%. Despite maintaining an impressive 80.86% gross profit margin, this shortfall was attributed to market forces affecting the company’s core retailer segment.

Auto Trader has indicated that for fiscal year 2026, retailer revenues may see a reduction due to a weaker-than-anticipated product lever in Average Revenue Per Retailer (ARPR). The stock has already reacted to this news, dropping 12.34% over the past week. In response to this, the company has decided to halt the standalone monetization of its Deal Builder product and instead integrate it into the main advertising offering, aiming to boost retailer adoption. With minimal debt (Debt/Equity ratio of 0.01) and strong cash flows, the company appears well-positioned to weather this transition.

The company has forecasted a 5-7% year-over-year increase in retailer revenue for FY26, which is slightly below the Visible Alpha Consensus of 7.4%. Citi analysts believe that this minor miss in the current fiscal year, coupled with the lower-than-expected retailer revenue growth forecast for the next fiscal year, is likely to result in a decline in the company’s share price today.

During the earnings call, the focus is expected to be on Auto Trader’s strategic shift regarding Deal Builder and its potential to enhance future pricing strategies. The company remains optimistic about the second half of the fiscal year, anticipating stronger performance.

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