Auto Trader, the online auto reselling platform, has a market share that is currently five times as big as the next challenger, Gumtree. The company “benefits from strong virtuous circle effects and very high barriers to entry.”
Auto Trader Group PLC’s dominance in the UK used car classifieds market is “unchallenged and unlikely to change” in light of the competition investigation launched, analysts at Liberum Capital said in a note recently.
The announcement by the Competition & Markets Authority (CMA) “should not cause major issues”, the City broker's number crunchers said, upping their share price target for the FTSE 100-listed firm to 640p from 620p and reiterating a ‘buy’ rating.
Recently, the CMA launched a probe into the digital economy and said a new regulator might be needed to police the growing power of digital platforms.
But Liberum's analysts pointed out that this probe seems to be more targeted at the US online giants such as Google and Facebook than the local classified players, “which may actually help" Auto Trader.
They pointed out that the car-reseller company’s market share is five times that of the next player, Gumtree and as the leader in the market, Auto Trader “benefits from strong virtuous circle effects and very high barriers to entry”.
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