Citi downgrades Auto Trader, says risk/reward more balanced
Citi downgraded its stance on shares of Auto Trader to ‘neutral’ from ‘buy’ on Friday as it said the risk/reward is now more balanced.
Auto Trader Group
701.20p
11:35 29/04/24
FTSE 100
8,185.66
11:35 29/04/24
FTSE 350
4,494.49
11:35 29/04/24
FTSE All-Share
4,447.56
11:35 29/04/24
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3,912.01
11:29 29/04/24
The bank, which lifted its price target on the stock to 580p from 494p, said its fundamental view on Auto Trader is unchanged.
Citi said Auto Trader is a high-quality asset operating in an attractive competitive landscape and is the clear leader in the space. It also said it sees potential upside from the Cox JV.
Against this, however, the shares have performed very strongly in the last 15 months and are now trading at a premium to peers, and notably, recent takeout multiples in the space. In addition, Citi said there may be some risk around capital flowing out of domestic online classified names, including Auto Trader, as Nasper’s spins out the largest internet stock in Europe.
"Putting this all together, we feel that the risk/reward is now more balanced and we downgrade Auto Trader to neutral.”
Citi said that while the bulls may still argue that Auto Trader is an attractive asset to a potential private equity buyer - and it would tend to agree - the potential premium to the current share price may be getting narrower so it can’t justify putting fresh money into the stock.