JPMorgan downgrades Auto Trader to 'underweight'

JPMorgan Cazenove downgraded Auto Trader on Tuesday to ‘underweight’ from ‘neutral’ and cut the price target to 555p from 630p as it pointed to easing momentum in the core business and an unattractive valuation.

Auto Trader Group
25 July 2023 09:16:43

Source: Sharecast

The bank argued that Retailer revenue momentum will likely slow, putting downside risk to consensus estimates for flat forecourts, and said it expects upselling and ad-on products to evolve at a slower pace.

It also said that stress testing new Digital Retailing initiatives - Deal Builder/Autorama - it concludes meaningful scale (at least 20% uplift to group profits) would require "rather stretched" assumptions.

JPM also pointed out the shares have now closed the valuation gap to peers and said the relative valuation is unattractive.

"With our estimates 5% and 7% below consensus on FY25/26E adjusted EPS and lack of catalysts, we see (far) better value elsewhere in Classifieds," it said. JPM favours overweight rated Scout24 and Adevinta.

At 0900 BST, Auto Trader shares were down 3.6% at 626.40p.

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