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Zoopla shaken by the new stamp duty rules

The property group continues to see higher traffic numbers but the new stamp duty rules will cool the UK property market.

Zoopla website displayed on a mobile device
Source: Bloomberg

 

When the company announces its full-year figures on 2 December, traders are expecting revenue of £105.6 million and an adjusted net income of £32.55 million. These forecasts equate to a 31% rise in revenue and a 22% rise in adjusted net income. The firm will also reveal its second-half figures on the same date, with traders anticipating revenue of £65.2 million, which compares with the first-half revenue of £41.96 million.

The property portal had a strong start to the financial year, but a number of challenges lay ahead. In the first six months of the year the company posted a 14% jump in earnings, and the outright Conservative majority initially proved to be beneficial to Zoopla. But the Tories gave with one hand and took with the other as the increase in stamp duty for overseas buyers and buy-to-let mortgages will trim demand for UK properties.

The new stamp duty rates will be applied in April 2016, and between now and then a rush of buying is likely. Investors will want to strike a deal before the new rules are introduced, but it will cool the overheated property market in the medium-term.

Zoopla lost a number of agents to Rightmove on the back of Onthemarket.com being launched, but the company is winning back some defectors. Zoopla’s website traffic is still on the rise, and mobile access now accounts for the majority of the access.

Equity analysts are very bullish on Zoopla, and out of the 16 ratings, eight are buys, five are holds, and three are sells. The average target price is 271p, which is 23% above the current price. Investment banks are also very bullish on Rightmove, and out of the 19 recommendations, nine are buys, eight are holds, and two are sells. The average target price is £41.04, which is 5.8% above the current price. 

Technical analysis from Joshua Mahony, market analyst at IG.

Zoopla is on the surge, with shares in the property website rising over 10% since the 20 November low of 213p. Having engaged trend line support dating back to March, price has now broken above the crucial 226p resistance level which marks the completion of a double bottom.

The projected target of the double bottom points towards a move back to 240p, yet given the large swings in the Zoopla share price, a move on towards the next resistance levels would not be surprising. While price remains above 213p, a bullish outlook is held, with resistance levels of 240p, 248p, 255p and 269p.

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