The FTSE 100 is showing signs of a slight recovery, with the index increasing by 19% since 23 March. Investors might be questioning whether they have left it too late to take advantage of any stock market rebound.
At the moment, I think it is still a great market for long-term value investors. Although the index has rebounded over the past month, it is still down by 21% year-to-date. This means that there could still be many stocks in great companies trading at a price below intrinsic value.
Rightmove’s (LSE: RMV) share price has dropped by 22% year-to-date. Currently, the business has a price-to-earnings ratio of 23. Unsurprisingly, the fall is due to the disruption in the housing market caused by the coronavirus pandemic. The number of properties failing to complete has risen, and Rightmove notes that there is likely to be a change in tenancy behaviours.
If you have ever bought or rented a property, then the chances are you have scrolled through Rightmove’s website. The site connects agents and buyers and earns its revenue by charging fees to estate agents. The website is searched on Google more frequently than ‘property’.
Due to the market disruption, Rightmove has announced that it will be cancelling its final dividend this year. It is estimated that this action will save the company roughly £38m. Although this might disappoint income investors, I believe Rightmove has taken a proactive and prudent step in these uncertain times. Many other companies in the FTSE 100 are also taking similar action.
Rightmove recognises that it is still too early to assess the financial impact the virus will have on its full-year 2020 financial results. However, revenues will certainly be hit. To support its customers in these unprecedented times, Rightmove is offering a discount of 75% for four months to all of its new homes, commercial, and agency customers.
The group excepts that this action will amount to a reduction in revenue of £65m to £75m for the financial year. Rightmove was able to introduce this initiative due to the strength of its balance sheet.
FTSE 100 rebound?
The property market will suffer in the short term. A fellow Fool, Edward Sheldon, has noted that the property consultant Knight Frank is estimating that around 520,000 house sales will be abandoned this year due to the coronavirus crisis.
The Rightmove share price could turn out to be a great buy for those investing for the long term. This is a low-cost, cash-generative business, with a strong position in the market. Because of this, it has been able to nudge up prices in the past, which is reflected in its trend of increasing profits.
Although I suspect the housing market will be rocked for some time, people investing in Rightmove now might benefit from its likely recovery and the FTSE 100 rebound. When the crisis is over, I still except that Rightmove will be the market leader in this field.
T Sligo has no position in any of the share mentioned. Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. The Motley Fool UK owns shares of and has recommended Alphabet (A shares) and Alphabet (C shares). The Motley Fool UK has recommended Rightmove. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.