Rightmove targets double-digit growth with AI push and £90m buyback

Rightmove reported resilient 2025 results with revenue up 9% to £425.1m and underlying operating profit up 9% to £297.7m (underlying margin 70%), while statutory operating profit rose 12% to £287.9m; basic EPS increased 15% to 28.1p and underlying basic EPS rose 11% to 29.1p. The group proposes a final dividend of 6.59p (total 10.64p, +9%) and returned £219.7m to shareholders in 2025, and has restarted a £90m buyback to be completed by 31 July 2026. Management guided 2026 revenue growth of 8–10%, strategic businesses (commercial, mortgages, rentals) to grow 20–30%, membership ~1% and ARPA up £110–£120, with underlying operating profit growth of 3–5% and a 67% margin as it accelerates AI and product investment including partnerships with Google Cloud and NatWest.

Analysis

Market structure: Rightmove (RMV) is the primary beneficiary — guidance (revenue +8–10% in 2026, strategic businesses +20–30%) plus a £90m buyback tightens free float and reinforces pricing power versus smaller portals and traditional marketing channels. Mortgage partner NatWest (NWG) and Google Cloud (tech stack) are secondary beneficiaries via referral flow and platform capabilities; housebuilders and transactional-dependent agents are relatively exposed if volumes soften. Cross-asset: equity positive for RMV, modestly supportive for sterling on buyback/earnings strength; limited immediate stress on UK sovereign bonds but risk assets could reprice if housing shocks occur.

Risk assessment: Tail risks include regulatory scrutiny on AI/data privacy, failed integrations with ChatGPT/Google, or a sharper UK housing downturn from higher-for-longer rates that cuts ARPA and membership — low-probability but high-impact. Time horizons: immediate (days) — buyback/buzz lifts sentiment; short-term (3–6 months) — monitor product adoption KPIs and mortgage referral conversion; long-term (12–36 months) — AI monetization and new vertical scale determine margin expansion. Hidden dependencies: agent willingness to pay ARPA increases depends on conversion lift from new digital tools; buyback uses cash that could limit M&A optionality.

Trade implications: Direct — consider establishing a 2–3% long position in RMV (LSE:RMV) now, scale into weakness through Jul 31, 2026 (buyback completion), target +15–25% in 12 months, stop-loss 8%. Add a tactical 1–1.5% long in NWG to capture mortgage referral upside over 6–12 months. Pair trade — long RMV vs short UK housebuilder (e.g., Taylor Wimpey TW) 1:1 to hedge macro housing risk for 6–12 months. Options — prefer a 9-month RMV call spread (buy ATM, sell 20% OTM) to cap cost, or sell covered calls if holding equity; hedge with a 6-month 8–12% OTM put spread if volatility spikes.

Contrarian angles: Markets may underprice scaling of strategic lines — if commercial/mortgage/rental reach £60–80m in 2 years, EPS leverage could be >20% y/y and multiples expand; conversely, consensus may be too optimistic on AI announcements — execution risk is real and could compress margins if lead quality falls. Historical parallel: portals that invested in seller tools saw durable ARPA gains but also drew regulatory and competitive responses; watch RMV valuation — trim if RMV >18x forward P/E, add if <15x.

Key Decisions for Investors

• Establish a 2–3% long position in Rightmove (LSE:RMV) between now and 31-Jul-2026 to capture buyback and product-launch upside; target +15–25% in 12 months, set an initial stop-loss at -8%.
• Allocate 1–1.5% long to NatWest Group (LSE:NWG) to play mortgage-referral upside from the partnership, review after 6 months — take profits at +10–15% or cut at -6%.
• Implement a 1:1 pair trade long RMV / short Taylor Wimpey (LSE:TW) for 6–12 months to isolate platform monetization vs housing-volume risk; size to net zero-beta exposure to UK housing if desired.
• Use options: buy a 9-month RMV call spread (buy ATM, sell ~20% OTM) sized to replicate 25–40% of the intended equity exposure, or sell covered calls on RMV positions post-buyback completion to monetize lower implied vol; hedge tail risk with a 6-month put spread 8–12% OTM.
• Reduce direct exposure to UK housebuilders (e.g., TW, PSN) by 3–5% of portfolio weight and rotate into tech-enabled real-estate platforms; reassess if RMV forward P/E crosses above 18x (trim) or below 15x (add).