Rightmove Stock Price Surges: What Should Investors Do Next?
The Rightmove (LSE: RMV) share price has seen a significant boost this morning, soaring 24% higher than Friday’s closing price. For long-term investors like me, this jump is certainly good news. However, faced with this sudden increase, the question arises – sell or hold?
Why the Shares Have Soared
The reason behind this surge in share price is the news of Australian property search firm REA Group contemplating a cash and share offer to acquire Rightmove. REA Group envisions a "transformational opportunity" to create a global and diversified digital property giant with dominant positions in Australia and the UK. While there have been no direct discussions yet, REA Group is racing against time to either make a firm bid or withdraw by September 30 under UK takeover rules.
The Right Move Now
Navigating such situations can be tricky for investors. While selling now might seem like a wise choice if no offer materializes and the share price falls, holding on could prove beneficial if a higher offer emerges or new bidders step in.
Is Rightmove Still Undervalued?
Despite the uncertainty, I believe holding onto Rightmove shares is the right move. With a forecasted earnings per share of 29.3p next year and a current price of 689p, the forward-looking price-to-earnings ratio stands at 23.5, which seems relatively low for a potential takeover target.
Moreover, Rightmove boasts strong fundamentals, including a robust brand and market position, consistent growth, impressive return on capital, solid financial health, and increasing dividends. This combination warrants a higher valuation and could attract more suitors beyond REA Group, such as other international property companies, private equity firms, or even tech giants like Amazon.
Furthermore, considering Rightmove’s past trading levels, reaching around 800p in late 2021, retaining the shares seems prudent for now.
Risk vs. Reward
While holding might come with risks, including the possibility of no bid materializing, the quality of Rightmove as a company provides confidence in its long-term prospects. Even if the acquisition falls through, the stock’s inherent strength suggests promising returns over time.
In conclusion, as an investor in Rightmove, the current situation presents a dilemma. However, with a solid company like Rightmove, equipped with a strong track record and valuable assets, holding onto the shares amid acquisition talks seems like the sensible path forward.
