When deciding which UK stock to buy, I like to come to my own conclusions. I certainly wouldn’t leave it to a robot.
On the other hand, it’s always nice to have a second opinion, even of the artificial variety. So I asked ChatGPT to tell me which UK share it though was best to buy over the next month. I never expected the answer would be property portal Rightmove (LSE: RMV).
The stock has completely dropped off my radar. Which is strange given that my partner spends half their days browsing it!
I assumed Rightmove must have dropped into the FTSE 250 but no, it’s still in the FTSE 100, with a market cap of more than £5bn. The shares have been doing nicely as well, up 17% in 12 months, although they’re flat over five years. So what was ChatGPT’s reasoning?
Is this a brilliant FTSE 100 stock?
My robot buddy admired the company’s clear market-leading position, hoovering up 80% of the time buyers and tenants spend on UK property portals. Success is self-reinforcing, as estate agents and property seekers can’t ignore it, ChatGPT said.
All of the performance figures it plucked out were for full-year 2023, which confused me. On checking, I discovered Rightmove’s 2024 preliminaries are published tomorrow. What are the chances!
Anyway, 2023 was pretty good, with revenue up 10% to £364.3m as customers continued to upgrade packages and increase their use of digital products.
Operating profit climbed 7% to £258m, while the board lifted the final dividend 10% to 5.7p per share.
ChatGPT was impressed by Rightmove’s “high profitability and efficient business model”, while warning that its performance is closely tied to the health of the UK property market. I think I’ve exhausted the limits of ChatGPT’s usefulness. So, what do I think?
For starters, I think the shares looked jolly pricey, trading at 26 times trailing earnings. That’s way above the FTSE 100 average of around 15 times.
Rightmove shares are cash generative but expensive
The price has been pushed up by a takeover offer by REA Group, which broker Jefferies now suspects is unlikely to materialise. I’m resistant to buying shares on takeover speculation anyway.
Much depends on the health of the UK economy and housing market. On Boxing Day, Rightmove reported record listings. If interest rates continue to fall and mortgages become more affordable, activity could climb further. And if Labour’s building boom actually happens, that should help.
Rightmove has another advantage. It doesn’t have to pour huge sums into developing online infrastructure.
Of that £258m operating profit in 2023, the board returned £201.7m to shareholders through dividends and share buybacks. It was a similar story in 2022. I’m surprised the trailing yield isn’t higher than 1.41%. Or the shares, for that matter.
Motley Fool trading rules mean I can’t buy any company for a couple of days after reviewing it. So my hands are tied until after tomorrow’s preliminaries, which will be an interesting read. However, I won’t consider buying until all the takeover fuss has been priced out.
ChatGPT has never pretended to be a stock picker. No investor should rely on it. But it has highlighted an interesting opportunity here. Rightmove is on my radar now.
