Cautious Outlook and Underperformance Lead to Sell Rating for Auto Trader

In a report released today, Ed Young from Morgan Stanley maintained a Sell rating on Auto Trader (AUTO – Research Report), with a price target of p680.00.

Ed Young has given his Sell rating due to a combination of factors impacting Auto Trader’s financial performance and future outlook. The company’s FY25 revenue of £601 million fell short of the consensus estimate of £606 million, indicating a weaker-than-expected performance. Additionally, the core business revenue and Average Revenue Per Retailer (ARPR) were both slightly below expectations, partly due to the rapid speed of sales negatively affecting stock levels.
Looking ahead, Auto Trader’s forecasted retailer revenue growth for FY26 is expected to be 5-7%, which is below the consensus estimate of 8%. Furthermore, the anticipated growth in ARPR is also projected to be lower than consensus figures. Although the Group EBIT margin is expected to improve due to reduced losses from Autorama, the core EBIT margin is predicted to remain stable, not reaching the consensus. These factors contribute to a cautious outlook, leading to the Sell rating.

In another report released today, J.P. Morgan also maintained a Sell rating on the stock with a p746.00 price target.