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The year 2014 was great for the British property sector, and Rightmove was one of the biggest benefactors from the housing boom. The first six months of the year witnessed a record number of enquiries, 22 million, which translated into a 20% rise in revenue and 31% jump in profits.
The double-digit rise in UK house prices last year sparked customers’ interest in the company’s website, and even the number of estate agents advertising on the site rose by 3%. Even though some of the traffic on Rightmove’s website is just window shoppers, the company is good at converting that into cash. In the first six months of the year, average revenue per advertiser rose by 13%, and the majority of that were existing advertisers increasing their coverage.
It is not just the UK residential market that is performing well for Rightmove, but also the overseas section and the commercial division. The number of people viewing overseas homes reached 35 million in the first-half, and there was a 50% jump in the number of views for commercial properties. The commercial section of the website has become one of the biggest in the country, and the diversification away from just residential business stands the company in good stead in the long run.
Rightmove’s share price hit a record high in January last year, and then drifted below £20 in October as fears of a rate rise in the UK put pressure on the stock. The decline in British inflation, coupled with dovish commentary from the Bank of England has left the market thinking that there will be an increase in interest rates until 2016, and this has assisted the recovery of the share price.
The consensus is for revenue of £163 million and adjusted net income of £93.8 million when Rightmove reveals its full-year numbers. These forecasts equate to a 17% jump in revenue and a 15% increase in adjusted net income. The first-half figures came in better than expected with a revenue of £80.3 million and adjusted net income of £47 million, when the consensus was for £78 million and £45 million respectively.
Equity analysts are very bullish on Rightmove. Out of the 21 ratings, 12 are buys, two are holds, and seven are sells. The average target price is £26.27, which is marginally lower than the current price. Investment banks are also bullish on Savills, and out of the four recommendations all are buys. The average target price is £8.12 which is 13% above the current price.
The stock has been rising since October, and is currently receiving support at £26. If this mark is held the upside resistance at £27 will be brought into play, and beyond that the market will look to the record high of £28.10. A drop below £26 will make the downside support at £25 the target.