Technology stocks have been dominant in recent years, and FTSE 100 tech superstar Rightmove (LSE: RMV) is no exception. The shares leapt 40 times in value between 2009 and 2025.
The online property website boasts some of the best margins going. Its name is entrenched in the world of housebuying. And it has the best returns on capital on the entire FTSE 100. But under the surface, there might be a few problems lurking.
The last six months have been little short of a disaster. A share price of 812p in August 2025 has fallen all the way to 440p by February 2026. That’s a loss of 46%. An investor putting £5,000 into the stock then would now be left with just £2,709 (ignoring some small dividends). Ouch.
What happened here? And how cheap could this stock be now?
On the surface, it looks like something of a bargain. The company is dominant in its space, having around an 80% market share. The website benefits from a ‘network effect’ where the top dog gets most of the business because that’s where everyone else is.
It’s why Facebook doesn’t have a direct social media competitor or there’s no major video website alternative to YouTube. In some sectors, there can only be one.
And because this is an online website with few assets and minimal expenditure, margins and returns on capital are high. The operating margin is a staggering 68%. The return on invested capital is easily the highest on the FTSE 100 too.
The drop in share price has had some effect. The dividend has been bumped up to 2.28%, pretty high for a tech firm. The forward price-to-earnings ratio is just 14, amazingly low for a tech firm. These numbers are so good, in fact, that they actually suggest there might be more than meets the eye here.
Risks at play
The real trouble, as ever these days, is those new-fangled artificial intelligences like ChatGPT or Gemini. The worry is that these chat interfaces will provide a better way to search for houses than the Rightmove portal.
Is the worry justified? As with most applications of AI, it’s too early to say. Forecasts suggest earnings and revenue will continue their steady rise, but it’s a situation that could change very quickly.
The latest moves from its leaders make it look like they’re concerned at least. Around £60m spending has been earmarked over the next few years to incorporate AI into the overall product. But the markets reacted badly – the share price fell 13% on the day of the announcement.
That cash outlay will make a dent in those handsome margins, and there’s also no guarantee of success either.
I think it’s fair to say that we’re at something of an inflection point for Rightmove shares. If the company can weather the AI storm then it may come out the other side stronger than ever. With the risks at play however, this isn’t a stock I’m interested in at the moment.
