Vox Markets Logo

Morgan Stanley downgrades Auto Trader to 'underweight'

11:50, 17th May 2024

Morgan Stanley downgraded Auto Trader Group Plc   Follow | AUTO on Friday 'underweight' from 'equalweight' and cut the price target to 600p from 625p.
"We see a mismatch between relative share strength and near-term Deal Builder growth, combined with relaxed sentiment around Google's entry into the UK," it said.

Morgan Stanley said it sees market/consensus expectations as skewing optimistic on near-term Deal Builder monetisation, while the market seems much more relaxed above the competitive threat from Google in cars than that from CoStar in real estate.

"As a result, AUTO now trades at a premium to Rightmove, which we do not see as warranted given similar revenue/EPS growth trends," it said.

"There is no change in our overall view of Auto Trader as a business, arguably the best-in-class car vertical operator in Europe. There is a long-term bull argument to be made around Deal Builder, but timing is not right yet, in our view."

Within European classifieds, the bank's preferred names remain Schibsted, which is its top pick, and Rightmove, which it sees as having more uncertainty/risk priced in.

At 1055 BST, Auto Trader shares were down 4.2% at 723.60p.

Stock Chart | AUTO

Disclaimer & Declaration of Interest

The information, investment views and recommendations in this article are provided for general information purposes only. Nothing in this article should be construed as a solicitation to buy or sell any financial product relating to any companies under discussion or to engage in or refrain from doing so or engaging in any other transaction. Any opinions or comments are made to the best of the knowledge and belief of the writer but no responsibility is accepted for actions based on such opinions or comments. Vox Markets may receive payment from companies mentioned for enhanced profiling or publication presence. The writer may or may not hold investments in the companies under discussion.