Auto trader: ftse 100 giant faces double city broker downgrade

Two City brokers have downgraded their forecasts for FTSE 100 heavyweight Auto Trader following the company's underwhelming financial results, which have led analysts to question

previous predictions of robust growth. Peel Hunt has reduced its annual revenue expectations for the group by four per cent, and also cut its earnings per share forecast and profit before

tax both by three per cent, as reported by City AM. Analysts Jessica Pol and Melanie Yang from Peel Hunt commented: "Fast selling speed in the used car market continues to impact the

company, and will likely weigh on growth in the near term." The broker now anticipates that Auto Trader's average revenue per retailer growth will only reach five per cent, a

significant drop from its earlier forecast of nine per cent. This decline in forecasts has also prompted Peel Hunt to downgrade net cash forecasts, as it is expected that all of the FTSE 100

company's free cash flow will be distributed to its shareholders through dividends and share buybacks. In the meantime, Panmure Liberum analysts have lowered Auto Trader's stock

price target from 840p to 820p, aligning with Peel Hunt's target while maintaining their rating for the group's shares as a Hold. Analysts Sean Kealy and Johnathan Barrett

highlighted "headwinds to non-core revenue lines," but noted that the used car market was gradually evolving in the group's favour. "The positive news is that one to

three year old cars are growing in volume and will soon enter the three to four year old car category – which is the most popular age group on dealer forecourts," the analysts

highlighted. Auto Trader's share price took a hit last Thursday, plummeting over 11 per cent following the announcement of its full-year results, which showed a modest five per cent

rise in average revenue per retailer for the past financial year. Russ Mould, investment director at AJ Bell, shed some light on the situation, saying: "Thanks to limited supply and

exceptionally strong demand, car tyres are barely touching the forecourt before they are snapped up and this means there is less need for retailers to buy advertising slots from Auto

Trader." He also noted some discontent among independent garages, stating: "There has also been some disquiet from independent garages online who feel they are being squeezed a

little too hard by the company. Although whether this will translate into lost business is another question." LIKE THIS STORY? WHY NOT SIGN UP TO GET THE LATEST BUSINESS NEWS STRAIGHT

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