Rightmove (LSE:RMV) isn’t in the FTSE 250 at the moment. According to the latest data though, it’s set to fall out of the FTSE 100 in the next few days.
A change in the index will bring buying and selling activity from the funds that look to match the index. But could smart investors look to position themselves ahead of the curve?
FTSE 100 ins and outs
The latest indicative data suggests that Rightmove and easyJet are set to fall out of the FTSE 100 and be replaced by IG Group and Tritax Big Box REIT. And that has implications for those stocks.
When the changes take place, funds that look to match the FTSE 100 should sell their Rightmove and easyJet shares and buy IG Group and Tritax Big Box. And they should do this whatever the prices are.
Enterprising investors might think there’s an chance to get ahead by buying the shares that are set to join the index. But the changes are already known about, so I think the opportunity here is limited.
I’m much more interested in the idea that there might be selling pressure on Rightmove when the changes take place. The stock’s already unusually cheap and it’s been on my radar.
AI disruption?
The stock‘s been falling sharply recently because of fears about artificial intelligence (AI). The concern is that Rightmove operates as an intermediary between estate agents and buyers, but there’s a risk. If something like ChatGPT can look for properties on estate agent websites, then why do they need to list properties on Rightmove? That’s a serious issue for the FTSE 100 company.
Although the firm’s looking to build out its own AI capabilities, the response from investors has been even more negative, because it’s going to mean lower margins and profits in the short term.
That’s why the stock’s down 45% in the last six months. The risks are real, but if it falls further as a result of leaving the FTSE 100, I think it could start to look very attractive.
Cost
Rightmove has some obvious advantages. It’s very well-established as the place where buyers go to look for listings and while changing this is possible, it won’t be at all easy.
There’s also another advantage that’s worth highlighting. Running queries through ChatGPT, Gemini, or Claude is much more expensive than performing an ordinary internet search.
That’s something the AI firms are going to have to figure out. And it means Rightmove has a very important competitive advantage when it comes to costs.
AI-based competition might make it harder for the firm to maintain its huge margins, but with the stock trading at a 45% discount, there’s a case for thinking a lot of disruption is already priced in.
A stock to buy in March?
Rightmove falling out of the FTSE 100 is like Spurs getting relegated from the Premier League. It was unthinkable a year ago, but it’s now a very real prospect.
Unlike Spurs though, Rightmove dropping a division might be a real opportunity. Investors should tread carefully, but I think it’s well worth considering at today’s prices.
