Rightmove more likely to be an AI winner than loser, says analyst

RBC Capital Markets says Rightmove is more likely to benefit from AI than be disrupted, after a solid 2025 financial year with revenue and operating profit both up 9%. The broker highlights Rightmove's strong data moat (over 90% proprietary, only ~50% scrapeable), 31 live AI projects (up from four in November) and 75,000 account manager meetings as competitive advantages, but warns margin pressure as investment rises—forecasting a 67% margin in FY2026 and lower thereafter—and trimmed its price target to 765p from 775p while calling the long-term investment case compelling.

Analysis

Market structure: Rightmove (RY) is structurally advantaged — 90% proprietary data, ~75k agent meetings and 31 live AI projects create a data+distribution moat that favors monetisation over pure-play LLM disruptors. Expect incumbents that own listing flow and trust (agents/portals) to capture pricing power in agent-facing AI services, while data-scrapers and new entrants without exclusive feeds will be marginalised. Short-term margin compression is likely (RBC: 67% FY26), but incremental ARPA uplift from AI could offset this over 12–36 months if agent uptake exceeds ~20–30% of accounts.

Risk assessment: Tail risks include regulatory limits on data use (GDPR-like restrictions or platform rules), major model failures that damage agent trust, or capex overspend pushing margins below 60% if AI investment >~5% of revenue. Immediate risks (days–weeks) are sentiment moves and analyst downgrades; meaningful operational read-throughs will take 3–12 months as pilot KPIs (agent adoption, time-to-listing) emerge. Hidden dependencies: monetisation requires agent workflow integration — sales cycles likely 6–18 months.

Trade implications: Tactical: establish a 2–3% long position in RY for 12–24 months to play AI-driven ARPA upside; hedge with a 6–12 month put spread (buy 6m 15% OTM put, sell 7.5% OTM put) limiting downside. Pair trade: long RY vs short OnTheMarket (OTM.L) 1–2% net exposure, expecting RY to monetise data faster. Options alternative: buy a 12-month call spread (ATM to +25% strike) to cap cost while keeping upside.

Contrarian angles: Consensus underestimates sales friction — agent adoption could be slower (12–18 months), so near-term margin pain may be priced-in excessively; if RY shares fall >10% on FY26 margin concerns, accumulate to 4–5% position size. Watch specific catalysts: quarterly agent ARPA change >+3% and agent adoption >30% within 12 months as upgrade triggers; regulatory guidance or a major data-access ruling are binary downside triggers.

Key Decisions for Investors

• Consider establishing a 2–3% long position in RY (Rightmove) with a 12–24 month horizon to capture AI monetisation; target add if shares decline >10% from current levels up to a 4–5% weight.
• Hedge downside risk by buying a 6–12 month put spread on RY (buy 15% OTM put, sell 7.5% OTM put) sized to protect ~50–70% of the long position cost while limiting premium outlay.
• Implement a relative-value pair: go long RY and short OnTheMarket (OTM.L) at equal notional 1–2% portfolio exposure, expecting RY to better monetise proprietary data over 12–36 months.
• Buy a 12-month call spread on RY (buy ATM, sell +25% strike) as a lower-cost upside play if you believe AI-driven ARPA will outpace margin compression; size to 1–2% notional.
• Monitor four concrete 90–180 day KPIs before increasing exposure: quarterly agent ARPA growth >+3%, agent AI adoption >30% of accounts, number of paid AI products live >10, and any regulatory data-access ruling — if two are met, increase position; if a negative regulatory ruling occurs, cut exposure immediately.