Berenberg, A leading German investment bank, has issued a warning about the risks involved in Rightmove’s business. Although Righmove’s stock has been a darling of investors for several years and has rebounded remarkably quickly from its nadir of 420GBX in March, its price slid slightly yesterday as the market reacted to Berberg’s assessment.
The bank has reiterated its “sell” advice for the stock and has concerns about Rightmove’s ability to stabilize agent numbers as well as the situation the portal’s customers may find themselves in soon:
“We, however, believe there are material risks to the financial health of estate agents when: a) furlough schemes end, and b) the stamp duty holiday ends at the end of March 2021”
The German bank also has concerns about the portal’s ability to successfully hike its prices to a disgruntled customer base and believes that the current discounts being offered are papering over the cracks.
“With substantial uncertainty ahead, and with now clear evidence of the cyclicality of Rightmove’s business, we believe a materially lower multiple is warranted.”
While investors may be somewhat surprised to read the Berenberg assessment after the portal reported record sales and traffic recently, it may not come as much of a surprise to agent pressure groups such as SayNoToRightmove who have long claimed that the company’s business model is unsustainable. While rival portal Zoopla has diversified its offering to include tertiary services around the transaction, it could be argued that Rightmove seems to have driven itself into a cul-de-sac whereby its principal way of generating momentum comes from rasing ARPA.