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The first half of 2024 has been modest for the UK's largest online property platform. Again i Rightmove (LSE:RMV) share price rose 3% in response to the latest update.
Revenue increased 7% and earnings per share increased 2%. But when it comes to whether or not to buy a stock, I think investors should listen to Warren Buffett.
Salaries
Revenue growth is driven by higher average revenue per advertiser. But margins have tightened, even after accounting for acquisition costs at the time.
As Buffett points out though, someone thinking of holding a stock for 10, 20, or 30 years will see a lot of earnings reports. And what matters are the ones yet to come.
If I buy a stock and hold until 2050, it is unlikely that I will care for six months in 2024. But how the company performs over the next 100 quarters will matter.
Fortunately, Rightmove looks to me like a classic case where the company's long-term prospects are much clearer than the short-term vision. And I think the future looks good.
A long-term vision
Rightmove accounts for over 80% of the UK's online property search market. That means anyone who wants to list a property more than likely has to go through its portal.
Revenue growth is less likely to come from increasing market share. In fact, it will be the result of rising prices, or the growth of the market as a whole.
Investors need to think about Rightmove's ability to maintain its large market share. But as long as it can do this, the company should have great pricing power.
Equally, there is room to be optimistic about the growth of the UK property market. The government's goal of simplifying the planning process and increasing construction output may be a major boost.
Risks and uncertainties
I think Rightmove is one of the FTSE 100leading businesses have a very impressive economic unit. But even the most attractive stocks come with risks.
Another is the opportunity for competitors to disrupt its market position. The US is a peer CoStaris looking to do this by expanding into the UK.
Another possibility is that the UK property market may not grow as expected. Building new 1.5m homes would require the current output to double, which is far from straightforward.
With a price-to-earnings (P/E) ratio of 23, the stock comes with long-term growth expectations. If this does not work, the investment may not go well.
Should I buy the stock?
I think Rightmove shares could be a great investment. But that's not because of anything that happened in the last three months – I'm interested in the long term.
The stock isn't cheap, but there are clear paths to future growth in terms of price strength and a growing market. That puts it on my list of companies to consider adding to my portfolio.
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