Auto Trader Share Forecast November 2021 – Time to Buy AUTO?
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Shares of British automotive classified advertising business Auto Trader (LSE: AUTO) is in the green today, currently trading at 712.8p at the time of writing. The shares had erupted yesterday morning after the company released its half-year results. The double-digit gains resulted in the share price increasing way beyond pre-pandemic levels. Currently, the 12-month return for AUTO investors stands at 20%.
Auto Trader – Technical Analysis
According to the financial statement released by Auto Trader, the market cap is at £6.736 billion with total assets worth £534.5 million. Revenue for 2020 was at £262.80 million with a profit margin of 48.63% compared to £368.90 million in 2019. It reported a 14% increase in cross-platform minutes per month, taking it to 633 million. This is almost 75% of the whole market, or in other words, car buyers spend almost nine times more time on Auto Trader’s site compared to its nearest peers.
Oscillators such as Stochastic RSI Fast (3, 3, 14, 14(100.0 ), Williams Percent Range (14)(−11.9) and Bull Bear Power(151.1) are neutral. On the other hand, moving averages such as Exponential Moving Average (10)(642.7), Simple Moving Average (10)(629.0), Exponential Moving Average (20)(624.8), Simple Moving Average (20)(616.4) and Exponential Moving Average (30)(618.6) are indicating a buy action.
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Recent Developments
The company’s well-received half year results indicated quite a few positives, coinciding with the online automotive marketplace reporting its highest half-year earnings in the history of the business. Auto Trader’s revenue jumped an astounding 82% compared to a year ago, reaching £215.4 million. It’s also an improvement from it 82% compared to a year ago, landing at £215.4 million. Operating income was 121% higher than a year ago. Recovering margins improved from 58% last year to 70% after the pandemic.
Looking at the operational side of the business, total visitors reached 68.7 million while the average time spent on the platform increased by 14%. More people are starting to spend large chunks of cash on buying a new car as a result of the adverse effects of Covid-19 on the economy starting to wane. The average monthly revenue per retailer which was £1206 a year ago has now become £2199. All of these factors have bolstered the share price in recent times.
Should You Buy AUTO Shares?
Investors interested in AUTO shares have to consider several risks, one of which is inflation, which has resulted in many governments around the globe starting issuing stimulus cheques. Now with economies flooded excess cash, inflation is on the rise. While it’s unclear whether this is permanent or temporary, it could put a dent in Auto Trader’s growth. However, if we look at the historical performance of Auto Trader against inflation, it has performed really well.
Auto Trader shares will benefit from the continued push towards digitalization. The host of new features introduced on its website is key to driving sales. Examples include the click & collect and home delivery functions and the Guaranteed Part Exchange function which provides users with a quick and easy way to get pricing on a potential sale.
Online marketplaces such as Auto Trader fair better in the stock market compared to the likes of Tesla. It has far better visibility as the £6bn-cap’s business model is based on recurring revenues. Along with this, other factors such as consistently high returns on capital and a bullet-proof balance sheet make it a great growth share. Therefore, these shares should be picked up by investors.
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