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Expertise shares have been dominant lately, and FTSE 100 tech celebrity Rightmove (LSE: RMV) is not any exception. The shares leapt 40 occasions in worth between 2009 and 2025.
The net property web site boasts a number of the finest margins going. Its title is entrenched on this planet of housebuying. And it has the most effective returns on capital on the complete FTSE 100. However beneath the floor, there is likely to be a couple of issues lurking.
The final six months have been little in need of a catastrophe. A share worth of 812p in August 2025 has fallen all the best way to 440p by February 2026. That’s a lack of 46%. An investor placing £5,000 into the inventory then would now be left with simply £2,709 (ignoring some small dividends). Ouch.
What occurred right here? And the way low-cost may this inventory be now?
On the floor, it appears to be like like one thing of a discount. The corporate is dominant in its area, having round an 80% market share. The web site advantages from a ‘network effect’ the place the highest canine will get many of the enterprise as a result of that’s the place everybody else is.
It’s why Fb doesn’t have a direct social media competitor or there’s no main video web site various to YouTube. In some sectors, there can solely be one.
And since that is a web based web site with few belongings and minimal expenditure, margins and returns on capital are excessive. The working margin is a staggering 68%. The return on invested capital is definitely the best on the FTSE 100 too.
The drop in share worth has had some impact. The dividend has been bumped as much as 2.28%, fairly excessive for a tech agency. The ahead price-to-earnings ratio is simply 14, amazingly low for a tech agency. These numbers are so good, in actual fact, that they really recommend there is likely to be greater than meets the attention right here.
Dangers at play
The true hassle, as ever lately, is these new-fangled synthetic intelligences like ChatGPT or Gemini. The concern is that these chat interfaces will present a greater strategy to seek for homes than the Rightmove portal.
Is the fear justified? As with most functions of AI, it’s too early to say. Forecasts recommend earnings and income will proceed their regular rise, but it surely’s a scenario that might change in a short time.
The most recent strikes from its leaders make it seem like they’re involved not less than. Round £60m spending has been earmarked over the subsequent few years to include AI into the general product. However the markets reacted badly – the share worth fell 13% on the day of the announcement.
That money outlay will make a dent in these good-looking margins, and there’s additionally no assure of success both.
I believe it’s truthful to say that we’re at one thing of an inflection level for Rightmove shares. If the corporate can climate the AI storm then it could come out the opposite aspect stronger than ever. With the dangers at play nevertheless, this isn’t a inventory I’m eager about in the meanwhile.
