Web portal Rightmove (RMV) has bucked the trend for the property sector with upbeat trading since the EU referendum vote, triggering a 10.6% rise in its shares to £41.93. The continuation of strong monthly revenue trends in the first half of the year into July highlights the resilience of its business model.

We had a good feeling the company would issue a positive statement, hence why we spelled out the investment case four week weeks ago in Shares. Our Play of the Week trade on the stock is now up 20% since we said to buy at £35.04 on 30 June 2016.

Rightmove has reported 17% rise in underlying operating profit for the first six months of 2016 to £82.3 million. Shareholders are being rewarded with a 19% rise in the interim dividend to 19p.

It says the amount of traffic to its website has risen by 15% to 127.5 million visits per month. People are also spending longer looking at properties on its site, up 9% to 1.05 billion minutes per month collectively.

Just as important is news that the average revenue per advertiser – namely all the estate agents with properties to sell or let – has risen £90 versus the same period last year to a record £830 per month.

Estate agents struggling to shift homes following the Brexit vote will no doubt spend more on marketing to get a sale over the line. This plays straight into Rightmove’s hands as the online market leader for property advertisements.

The business model isn’t immune to UK economic deterioration. A big downturn in the housing market could see some estate agents go bust and therefore a loss of advertising revenue for Rightmove. Yet that is perhaps the most extreme situation.

Investec says it sees a risk to estate agent membership with Rightmove in its 2017/2018 financial year from falling transaction levels, thought it doesn’t see a repeat of the 2008 downturn. ‘Rightmove is also in a strong position given market leadership and importance to agents,’ says analyst Richard Holroyd.

‘While negative housing newsflow could hit Rightmove’s (equity) rating, on the basis it continues to deliver, we would view share weakness as a buying opportunity. A ‘bullet proof’ business model, high margins, strong innovation, and potential market shift to vendor-funded spend support our positive long-term view,’ he adds.

We’ve published numerous stories on Rightmove over the past year. They are well worth reading if you want to learn more about its business model. Click on the following links; we’ve set them as free access so you don’t need to be a Shares magazine subscriber to read the stories.


Our view on Rightmove following the Brexit vote


Why Rightmove is a ‘bulletproof’ stock


A look at the property portal market


Issue Date: 27 Jul 2016