ii view: slow housing market but Rightmove broadly optimistic

Second-half trading update from 1 July to 31 October

• Continues to expect full-year revenue growth of 7% to 9%
• Continues to expect an adjusted underlying operating margin of 70%

Chief executive Johan Svanstrom said:

"This has been another period of strong progress for Rightmove, and it's pleasing to see our product development and sales delivery generating increased uptake from consumers and partners.  

“We see a long runway of opportunities, leveraging our superior platform and data scale to generate increased value for all stakeholders."

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ii round-up:

Rightmove (LSE:RMV) today flagged increased optimism among estate agent customers heading into 2025 compared with this time last year. 

The online property advertiser pointed towards its own market data showing positive albeit subdued house price growth, backed by stable mortgage rates and a favourable outlook for further interest rate cuts. Management continues to expect 2024 revenue growth of 7-9%, with an adjusted underlying operating margin of 70%. 

Shares in Rightmove, which earlier in the year fended off a takeover bid from Rupert Murdoch's Australian property business REA Group, fell 1% in UK trading. They're up 26% over the last year, though, similar to estate agent Savills (LSE:SVS) and ahead of a 5% gain for the FTSE 100 index. 

Property professionals, such as estate agents, lettings agents and new home builders, pay Rightmove a subscription fee to advertise their properties on its website. 

Average Revenue Per Advertiser (ARPA) for the year is expected be between £85 and £95 higher than 2023's £1,431, up from management’s previous estimate of £75-85. 

On a divisional basis, expected 2025 growth for Estate Agency is expected to be supported by a continued customer migration to its top ad package, Optimiser Edge. 

For New Homes, Rightmove flagged slightly more developments on site and expected ongoing growth during 2025 as developers continued to turn to its products for their marketing needs.

Rightmove advertising in recent months had included sponsorship of `The Voice' on ITV (LSE:ITV) and ITVX, reaching over 14 million people.

ii view:

Started in the year 2000, Rightmove came to the stock market six years later. Today it employs around 800 people and is a constituent of the UK’s premier FTSE 100 index. Agency related sales generated its biggest slug of revenues in 2023 at 72%. New home developer demand made up a further 18%, with other businesses such as commercial property, data services, overseas listings, and third-party advertising accounting for the balance of 10%.  

For investors, elevated interest rates continue to pressure mortgage affordability. The fall in housing transactions to 1 million in 2023 from 1.5 million in 2021 will have pressured customer, or agency numbers, with some having failed. Time spent on its website by consumers fell to 15.4 billion minutes in 2023 from 16.3 billion in 2022, while a forecast dividend yield of under 2% compares with over 5% for property owners and REITs Land Securities Group (LSE:LAND) and British Land Co (LSE:BLND).

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More favourably, hopes for further interest rate cuts persist, potentially increasing housing transaction numbers and encouraging more homeowners to try and sell. A diversity of customer types is present from buyers and renters under agency customers to new home sales from developers. The previous takeover approach from REA Group suggests potential for M&A activity, while targeted areas of growth away from its core focus include mortgages, rental services and digitalising the process, as well as commercial real estate. 

For now, and despite ongoing risks, Rightmove’s dominant market position continues to reassure, with fans of this online advertiser likely staying patient.  

Positives: 

• Strong market position
• Diversity of customers

Negatives:

• Uncertain economic outlook
• Costs generally remain elevated 

The average rating of stock market analysts:

Strong hold