Car listings site Auto Trader (AUTO) is down 1.8% to 577p despite delivering full year results at the top end of expectations.
Three factors are likely to be weighing on the shares. One is the already strong run the shares have already enjoyed in the last 12 months - a lot of good news has been priced in by investors.
A second consideration is the wider negative sentiment around the automotive market. Finally, having delivered a near double-digit increase in its key average revenue per retailer (ARPR) metric, the company says growth will not reach these ‘exceptional’ levels in the current financial year.
In the 12 months to 31 March 2019, pre-tax profit increased by 15% to £242.2m and revenue rose by 8% to £355.1m.
ARPR rose 9% to £1,844 a month, with growth from product and price offsetting the expected reduction from stock.
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AJ Bell investment director Russ Mould says: ‘The car industry might be stalling, but vehicle listings website Auto Trader continues to motor along nicely.
‘Auto Trader’s website is the one most visited by prospective car buyers because it has the most listings. Car retailers are therefore compelled to use its products, reinforcing its leading position.’
Mould believes future earnings growth is likely to be reliant on increasing ARPR further given the volume of vehicles on the site is expected to dip.
He adds: ‘In fairness it is not a case of Auto Trader simply charging a higher price for the same thing but rather of up-selling retailers to a wider range of products and services. This could still be a tough ask given the challenges facing the sector.’
