Rightmove's share price has just risen by 24%! What is the best move now?

I Rightmove (LSE: RMV) share price rose sharply this morning (2 September). As I write this, it is 24% higher than Friday's closing price.

As a long-term investor in Rightmove, I am obviously very excited about this jump. But what is the best move to make now? Should I sell my shares and take my profit off the table or hold on to it?

Why do stocks go up

The reason the share price fell today is that overnight, it was revealed that the Australian property search company REA Group (which I also invest in) is considering buying Rightmove for cash and a share offer.

REA Group says it sees “an opportunity for change” to leverage its skills and expertise, creating a global and diversified digital architecture company with leading positions in both Australia and the UK.

It is worth pointing out that the Australian company has not approached, or held discussions, with Rightmove. It also noted that there is no guarantee that an offer will be made.

However, REA Group must now submit a firm bid for Rightmove or return by 30 September, due to UK takeover rules.

Right move now

I have been in this situation many times before. And it's always hard to know what to do.

Selling my shares in Rightmove now may look smart if no final offer emerges and the share price returns to low levels.

But it could be a big mistake if Rightmove manages to negotiate a higher offer or other buyers emerge and the share price rises further.

Still cheap?

Looking at the fundamentals here, I'll hold on to my Rightmove shares for now.

Next year, the company predicts it will generate earnings per share of 29.3p. So, at the current share price of 689p, the forward price-to-earnings (P/E) ratio is just 23.5.

That strikes me as a bit low to take here.

This is a company that:

• Strong brand and market position
• A long-term successful growth record
• Very high return on capital (one of the most profitable companies in the world FTSE 100 index)
• A strong balance sheet
• Increasing benefits

Therefore, I think it deserves a high rating.

I would actually be disappointed if Rightmove agreed to take the money at the current rates.

I also wouldn't be surprised to see other bidders emerge given Rightmove's market position and data warehouse.

Other international real estate companies may be interested in the company's assets. As likely private equity firms and technology companies are interested Amazon.

Another thing to mention here is that the shares have been trading at high levels in the past. Back in late 2021, they rose to around 800p. This is another reason I will hold on to for now.

Risk versus reward

Now, this strategy would set me back. As I said earlier, there is no guarantee that the request will be available. REA Group can do more research, find something they don't like (such as the increasing levels of competition in the UK property search market), and withdraw the offer.

But even if that happens, I would be comfortable with the shares. This is a high quality company and I can expect the stock to do well in the long run.