Rightmove - 1Q24 update
This morning Rightmove announced their trading update for the first quarter of 2024. Guidance for the full year confirmed.
Today Rightmove confirmed it’s revenue guidance of 7-9% for the year and an operating margin of at least 70%. A summary of the earnings:
Consumers continue to choose Rightmove for over 80% of all consumer time spent on UK property portals.
Upgrade of the expected customer growth, from a small decline previously to an increase of agent branches by 2%.
Increase in listings availability rental market of 18%.
Reduced Average Revenue Per Advertiser (ARPA) from GBP 100-110 increase to GBP 75-85 as a result of a change in product mix because lettings-only estate agencies typically have a lower ARPA.
Strong growth of new home developments added to the platform.
Overall Rightmove expects a better year for the UK property market in 2024 versus 2023.
Conclusion
The trading update is in line with guidance for revenue and operating margin, however the decline in agent branches is no longer foreseen and Rightmove now expects a small increase. This is good news, especially in the light of the increased competition after the acquisition of OnTheMarket. As highlighted in my Rightmove analysis published last month, it’s unlikely the moat of Rightmove will be impacted. I think market was afraid for a further decline in agencies, which seems not to be the case. Next to this market also questioned whether they will be able to keep up the increase in ARPA. The ARPA for this year has been lowered, but if we wouldn’t consider change in product mix the ARPA would not have changed. In my discounted cashflow model in prior analysis I took a 7% revenue increase to be on the safe side given the small decline in agencies. Now this decline isn’t there and the rental and new home business looks promising I think it’s likely we will see an 8 or 9% increase. Lets first wait till the half year results, before I will update the case.
Rightmove is currently down around 4.7%, probably because of the reduction in expected ARPA. I am happy with the current update and with a price of around 545 it’s still well above my entrypoint of 520.