The Rightmove (LSE: RMV) share price has recovered well from the stock market crash, with a helping hand from chancellor Rishi Sunak’s stamp duty holiday. It’s up more than 7% this morning, despite reporting that first-half revenues dropped by a third. Investors have also been encouraged by new Halifax figures showing house prices lifted 1.6% in July.
The UK’s largest property portal has reported a sharp increase in activity, as pent-up demand is unleashed and owners rush to buy a new home after tiring of being locked down in their old one.
This should help underpin the Rightmove share price. However, I can’t help worrying that investors have got too excited today. The FTSE 100 company’s revenues fell 34% year-on-year, reflecting the impact of its 75% discount on customer fees between April and June.
FTSE 100 growth star
Average revenue per advertiser fell by the same percentage, from £1,077 to £712. That’s a blow. But at least it’s helping to keep customers on the site. Investors are clearly hoping this was a one-off hit, and the Rightmove share price will hold firm as Britons go property crazy once again.
Operating profits were 43% lower at £61.7m, despite a 7% reduction in operating costs to £33.1m. Still, making any kind of profit in the first six months of this unprecedented year is an achievement. The group had £50.3m in cash at 30 June, which is up from £36.3m at the end of last year.
Current housing market buoyancy may not last though. Furlough is due to end in October, hitting buyers in the pockets. On the other hand, that might lead to an increase in forced sellers, boosting site activity (albeit for the wrong reasons).
Rightmove isn’t paying any dividends at the moment. However, management said today it remains committed to returning all free cash flow to shareholders through dividends and share buybacks as soon as “prudent”.
We don’t know when that will be, of course. Rightmove doesn’t feel able to issue forward guidance at the moment, although it’s hardly alone in that.
The Rightmove share price is expensive
The extension of the Help to Buy scheme and record low mortgage rates should keep the property market ticking over. What happens after that depends on the shape of the recovery. The stamp duty holiday is due to end on 31 March, and that could depress activity from January.
The Rightmove share price trades 15% higher than a year ago, which compares well to a 17% drop on the FTSE 100 over the same period. The site retains a dominant market position, with a 50% listings lead over its nearest competitor. This gives it welcome pricing power and allows it to shrug off estate agent grumbles about costs. They’ve joined forces to launch OnTheMarket as a competitor, but Rightmove is top dog for now.
My big worry is that the Rightmove share price looks pricey, giving current uncertainties. It trades at almost 50 times forward earnings.
