Auto Trader Group Faces Target Cut as Broker Cites Weak Revenue Momentum

RBC Capital Markets has reduced its price target for Auto Trader Group PLC (LSE:AUTO) to 535 pence from 830 pence, citing weak revenue momentum and an absence of near-term catalysts that would support a rerating of the shares. The broker maintained its Sector Perform rating, with the revised target representing only a modest premium to Auto Trader’s current market price of 515.2 pence.

The downward revision reflects RBC’s decision to cut its financial year 2027 revenue and adjusted EBITDA estimates by 3.5 per cent to £650.6 million and £435.3 million respectively. The adjustments stem from weaker guidance concerning average revenue per retailer and dealer forecourt numbers.

Analyst Ross Broadfoot stated that the firm sees limited catalysts in financial year 2027 that could drive upside to average revenue per retailer. The rapid turnover of vehicle sales presents a particular challenge, as dealers demonstrate less inclination to pay for premium listing products when stock moves quickly.

RBC noted that overall stock turnover remained approximately 30 days, whilst electric vehicles in high demand were selling a week faster than the previous year. This accelerated sales environment diminishes the value proposition of enhanced listing services for dealers.

The broker has adjusted its valuation methodology for Auto Trader to 10 times forecast financial year 2027 EBITDA, down from 16 times previously. This change follows a broader derating across the sector, reflecting revised expectations for growth and profitability in the automotive marketplace segment.

The substantial reduction in the price target underscores the challenges facing Auto Trader as it navigates a changing market environment characterised by swift inventory turnover and evolving dealer requirements. The proximity of the new target to the current share price suggests limited upside potential in the broker’s view, barring significant operational improvements or market developments.