FTSE 100 opportunity?
Rightmove is the largest online property portal in the UK. It was created by the top four estate agents in the UK back in 2000 and joined the stock market in 2006. The housing market is currently thriving in the UK and Rightmove is well placed to benefit in my opinion.
There are a few things I like about Rightmove. It is the top property website visited in the UK. Property seekers and estate agents use Rightmove as the go-to platform. This high level of traffic means it can set its own pricing and charge agents pretty much what it wants for them to use its platform. In addition, Rightmove has very low expenses and due to its success and size, it is able to offer some of the best profit margins in the FTSE 100.
As I write, shares in Rightmove are trading for 695p per share. This time last year, shares were trading for 614p which means the share price has increased 13% in 12 months. Looking back further, at the height of the market crash shares dropped to 420p per share. At current levels, the share price has increased by 65% in a year and a half.
Return to pre-pandemic performance
The Covid-19 pandemic affected the performance of most FTSE 100 firms. Since that time, only a handful have seen a return to pre-pandemic levels of performance. Rightmove is one such firm and its half-year report released on 30 July showed this.
Rightmove’s update showed that its revenue and operating profit had surpassed H1 2020 levels substantially and 2019 pre-pandemic levels too. In addition to revenue and profit, its interim dividend and earnings per share were also better than 2020 and 2019 levels.
Rightmove’s H1 2021 revenue stood at £149.9m which was 58% higher than 2020 and 4% higher than 2019. An operating profit of £114.9m was 86% better than 2020 and 5% better than 2019 levels. An interim dividend of 3p was also declared.
As well as the financials, Rightmove said that it’s membership numbers remained consistent. Furthermore, its revenue per advertiser (ARPA) was its highest ever recorded. The previous high was recorded prior to the pandemic in 2019.
Risk and reward
All FTSE 100 stocks have risks and potential reward and Rightmove is no different. Firstly, the stamp duty holiday ending on 30 September could result in a reduced number of property sales and rentals, which could hurt Rightmove’s bottom line and progress to date. Next, the fact that Rightmove’s share price is trading at all-time highs is a risk to bear in mind. Any negative news or economic issues affecting the housing market could result in a share price fall.
Overall, I would happily add shares to my portfolio just now. I view Rightmove as an excellent FTSE 100 option for my portfolio. As a market leader, it has the size, track record, and ambition to continue growing which means it could be a useful addition to my portfolio.