LONDON (ShareCast) - (Sharecast News) - RBC Capital Markets downgraded Rightmove to 'underperform' from 'sector perform' on Wednesday, slashing the price target to 440p from 550p as it said the shares are not appropriately discounting the risk of prolonged pressure on the property market and in turn on Rightmove's customers.
RBC said the company's defensive business model and attractive cash flow characteristics have warranted a historical 60% price-to-earnings premium to the market.

However, the likelihood of the immediate, sharp impact on the property market from Covid-19 extending into a drawn-out period of weakness has increased, and as a result, RBC expects an acceleration in estate agent closures and greater pressure on Rightmove's average revenue per agent in the near term.

RBC said the lockdown could have longer-lasting effects on the economy, adding pressure on agents.

"The inevitable rise in UK unemployment and weakened consumer confidence are likely to dampen property demand beyond the lockdown. GfK's consumer confidence index in March plummeted to its lowest level since the financial crisis.

"Sentiment across the housing market has also deteriorated sharply in March, as highlighted by the latest RICS UK Residential Survey results, with the majority of respondents expecting sales to be down over the year ahead. Rightmove's pricing power may be undermined by a downturn."

At 1010 BST, the shares were down 3.7% at 485p.

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