1 week ago
Auto Trader’s latest products could see further opportunities to expand average revenue per retailer, says analysts following its latest stock market valuation.
Stock market analyst Zeus Capital has issued a recommendation on Auto Trader shares, stating that its shares price has increased by more than 50% in the last two years – far exceeding the FTSE 350 by more than 25%.
It issued the update as it now predicts Auto Trader’s share price could reach 905p, and already exceeds the previous valuation estimate of 770p.
Zeus Capital said: ‘We now revisit our valuation analysis for Auto Trader and our assessment of its long-term earnings growth potential, concluding that the group has a substantial runway to expand average revenue per retailer (ARPR) and earnings per share.’
In October 2022 it predicted that used car dealers could ‘double operating profit per unit sold’ by using the Deal Builder product, which allows consumers to complete more of the transaction online.
Zeus adds that for the 23,000 car dealers now using the product, 20% of consumers are paying a 0.25% transaction fee when going through the sales process this way.
In November, Auto Trader also launched its ‘Co-Driver’ product, which adds AI and machine learning tools to help dealers using the platform.
‘This will be another add-on for dealers and provides a further opportunity to expand ARPR, either via the Product or Pricing lever,’ it added.
The update also highlighted the strength of the used car market compared to new, with it recovering much faster post-Covid.
The statement explains: ‘Whilst there are well-publicised weaknesses in private new car registrations in the UK, the used car market’s health remains robust.
‘Auto Trader’s latest monthly reporting shows strong demand for used vehicles with cars taking two days faster on average to sell (29 days) versus November 2023 (31 days) and pricing expected to remain solid.
‘Auto Trader is also forecasting a 1.2% increase in used car transactions to 7.7m in 2025, only 3% behind 2019 levels of 7.94m.
‘In contrast, UK new car market registrations are forecast to be 14% behind 2019 levels in 2025.
‘We believe that the relative robustness of the UK used car market supports a stable number of used car retailers using Auto Trader.’
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The post Revenue at used car dealers predicted to grow following Auto Trader initiatives, says analysts appeared first on Car Dealer Magazine.
