Auto Trader’s revenue forecasts have been downgraded by City brokers. FTSE 100 company Auto Trader faced revenue downgrades from Peel Hunt and Panmure Liberum following disappointing financial results, casting doubt on future growth expectations. Peel Hunt reduced its annual revenue forecast for Auto Trader by four per cent, lowering its earnings per share and profit before tax projections by three per cent each.
Peel Hunt analysts Jessica Pol and Melanie Yang highlighted the continued fast selling speed in the used car market as a factor likely to impede near-term growth. The broker now projects Auto Trader’s average revenue per retailer growth to be five per cent, down from their previous estimate of nine per cent. This adjustment also led to a reduction in net cash forecasts, with Auto Trader expected to allocate all free cash flow to shareholders via dividends and share buybacks.
Panmure Liberum also adjusted its stock price target for Auto Trader from 840p to 820p, aligning with Peel Hunt’s target, while maintaining a Hold rating on the shares.
Analysts Sean Kealy and Johnathan Barrett noted challenges to non-core revenue lines, but observed gradual improvements in the used car market for Auto Trader. They pointed out that cars aged one to three years are increasing in volume and will soon join the more popular three to four-year-old category.
Auto Trader’s stock dropped over 11 per cent last Thursday after full-year results revealed just a five per cent rise in average revenue per retailer. AJ Bell investment director Russ Mould attributed this to limited supply and high demand, reducing the necessity for retailers to purchase advertising slots from Auto Trader. Additionally, there has been some discontent from independent garages feeling pressured by the company, though the impact on business remains uncertain.
