FTSE 100: 1 stock I’d buy with £1,000
Property e-marketplace Rightmove (LSE: RMV) reported a strong set of results this morning, further consolidating its position as the leading portal for real estate.
Rightmove turns in good results
The FTSE 100 stock saw huge revenue growth of 58% in the first half of 2021 compared to the year before. There is, of course, a base effect at play here. This time last year, the numbers were poor because of the pandemic. But its revenue has risen by 4% compared to 2019 as well. This suggests that a genuine recovery is underway. Similarly, its operating profit is up 86% compared to 2020 and 6% from 2019.
In terms of its operational highlights, Rightmove has also made progress. Its average revenue per advertiser (ARPA) is up 63% from last year and site visits are up 64% as well. The time spent per visit has also increased.
It is positive about its future performance, saying that it is “confident in delivering its expectations for the full year and beyond”. This could be a positive for the Rightmove share price, which is already up 20% over the past year.
Positive long-term picture
I also like its long-term story, and it is for this reason that I have bought the stock. Over time, I think it is reasonable to expect that buying and selling will become increasingly digital.
The pandemic has encouraged us to go digital in making our purchases. And it has even proved to be more convenient and cost effective in some cases. With consumers now more primed for digital shopping and companies’ capability to meet the need for new solutions, I reckon that growth for companies like Rightmove may be on an accelerated path.
High price, limited support
For now though, there could be some softening in digital sales. Last year was particularly good for digital companies, driven by pandemic-related restrictions. Additionally, demand for housing was strong thanks to supportive government policies.
But as the pandemic recedes and the economy reopens, customers may prefer real-world property searches. Also, the real estate boom could slow down as policies like the stamp duty holiday start being rolled back. This could impact Rightmove.
Also, its price rise may be held back by its relatively high price-to-earnings (P/E) ratio at over 30 times, according to my calculations based on the latest numbers. Many other high-performing companies, including FTSE 100 real estate stocks ,have a lower P/E. This makes it harder to justify why it is so high for Rightmove.
But then again, an argument for why it is high is that such companies represent the future. And it may well be this anticipation of high future growth that drives up their prices. I know that is a reason I have bought it, along with shares like Ocado and Deliveroo. It is still a long-term buy for me. With an additional £1,000 to invest, I would put it into Rightmove.
Manika Premsingh owns shares of Deliveroo Holdings Plc, Ocado Group, and Rightmove. The Fintech Zoom UK has recommended Ocado Group and Rightmove. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Fintech Zoom we believe that considering a diverse range of insights makes us better investors.