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Inv esting.com -- Bernstein has initiated coverage of Rightmove (LON:RMV), the UK’s largest property portal, with an “outperform” rating and a price target of 870p, representing a 23% upside from its September 30 closing price of 708.6p.
The brokerage highlights the company’s dominant position in the £10 trillion UK property market, supported by more than 70% market share, 96% agency retention, and over 95% brand awareness among homeowners.
Analysts point to Rightmove’s strong financial foundations, including operating margins above 70% and £1.6 billion in cash returned to shareholders over the past decade, with a further £800 million expected in the next four years.
For 2024, the company reported £390 million in revenues and adjusted EBIT of £273.9 million, with forecasts of revenues rising to £471 million and EBIT to £333.2 million by 2026.
The coverage initiation outlines revenue growth drivers centered on average revenue per advertiser (ARPA) increases and new package rollouts.
ARPA growth is expected at 7% annually between FY25 and FY28, helped by annual price rises and the upgrade of developers to the Ascend package, while “Other” revenues, driven by mortgages, commercial property, and data services, are forecast to grow at a 23% CAGR over the same period.
The Optimiser Edge package upgrade cycle, now 90% complete, is also expected to fuel further ARPA growth.
The report identifies potential upside from Rightmove’s mortgage services, which it estimates could generate £25 million in revenue by 2028, and from the commercial property segment, where revenues are projected to double from 3% to 6% of group sales by 2028.
Despite increased competition following CoStar’s 2023 acquisition of OnTheMarket, Bernstein notes Rightmove has maintained over 70% market share without additional marketing spend.
Bernstein flags mixed signals in the UK property market, citing the impact of the Renters’ Rights Bill, mortgage affordability trends, and the upcoming November budget.
The brokerage applies a weighted average cost of capital of 9.7%, reflecting this uncertainty.
Still, it adds that Rightmove’s entrenched market position, resilient revenue streams, and strong cash returns make it a compelling investment at current levels.