Many house-hunters will know how Rightmove feels: ambition stymied by the state of the wider property market and the actions of other professionals. Would-be homebuyers bemoan slow conveyancing work and lazy mortgage brokers; investors in the property listing site were hurt in October by the £99 million takeover of a rival online platform, OnTheMarket, by the global property data giant CoStar. The fear was that the new owner would invest heavily to steal a chunk of Rightmove’s territory.
The FTSE 100-listed Rightmove traded above £8 two years ago, and at £6 earlier this year; it is now changing hands for about £5.60. In part, that is because CoStar clearly has the British firm in its sights, explicitly referencing it on five separate occasions in its takeover announcement, including pointing out that CoStar’s roster of websites drew “roughly twice the monthly visits reported by Rightmove”, and that it will “participate aggressively” in increasing its own market share.
However, OnTheMarket, founded in 2013 — or 13 years after Rightmove, was almost 50 times smaller by market value before its takeover. The brand is weaker and “the risk to Rightmove from this move is overstated,” said Gareth Davies, an analyst at Numis Securities.
Its own business looks in fine fettle. At a trading update last month, Rightmove confirmed a target for revenues to almost double from £333 million last year to £600 million by 2028 — and it is aiming for operating profit to go above £420 million by 2028, up from £245 million last year. Revenue is growing “marginally ahead” of expectations, chief executive Johan Svanstrom said, despite the continued housing market uncertainty.
The City is pencilling in overall revenue growth as high as 10 per cent for 2023, and underlying operating profit growth of up to 8 per cent. The firm is strongly cash generative and free of debt.
The stock has recovered in recent weeks and is no longer going cheap: it is changing hands at 20 times earnings. But Rightmove’s website already receives more than two billion visits a year, and macro trends — property value inflation, a chronic shortage of housing, strong lettings demand and the improving interest rate environment — should push this ahead. The firm has become adroit at harnessing its vast vault of data and told investors at a recent capital markets day that it has identified about 100 ways to use generative AI to improve its interactions with both agents and consumers.
OntheMarket is still a minnow and a US parent may not flourish in the quirky British housing market. Buy Rightmove.
