Auto Trader Group shares (LON:AUTO) experienced a decline today, pressured by a downgrade from Jefferies, raising concerns about the company's future pricing strategies. The stock price initially plummeted to a new 52-week low of 566p before recovering slightly to a current level of 575.60p, marking a 1.57% decrease on the day.
The catalyst for this downturn was Jefferies' decision to lower its rating on Auto Trader from ‘Buy' to ‘Hold,' accompanied by a reduced price target of 650p, down significantly from the previous 895p. This revision reflects apprehension regarding the rollout of Auto Trader's Deal Builder product and broader uncertainties surrounding the company’s pricing approach slated for 2026. The market reacted swiftly to this revised outlook, prompting investors to reassess their positions in the online automotive marketplace.
Jefferies' downgrade specifically highlights issues surrounding the Deal Builder product suite, launched in late 2025. The firm expressed concern over the manner in which dealers were integrated into this product, stating that the situation warrants attention despite Auto Trader's efforts to address the issues. The impending April 2026 pricing event, where Deal Builder is expected to play a crucial role in supporting price increases, adds another layer of uncertainty that influenced Jefferies' decision to revise its rating.
Auto Trader's financial performance for the fiscal year ending March 2025 showed a 5% increase in revenues, reaching £601.1 million. While representing growth, this figure indicates a slowdown from the 14% expansion observed in the previous year. The core Auto Trader unit experienced a 7% rise in sales, amounting to £564.8 million, whereas the Autorama division saw a 12% decline in revenues, falling to £36.3 million. Operating profit for the year grew by 8% to £376.8 million. The company has highlighted strong demand for used cars, counterbalanced by supply constraints, particularly impacting vehicles aged three to five years. This imbalance has led to quicker sales cycles and a reduction in dealer listings.
The combination of a cautious analyst outlook and the company's reported financial performance has weighed on investor sentiment. While Auto Trader maintains a strong position within its market, the prevailing conditions and strategic uncertainties have seemingly tempered growth expectations for the coming year.
Bull Case:
- Despite a slowdown, revenues still grew 5% to £601.1 million for the fiscal year.
- The core Auto Trader business unit saw a 7% rise in sales to £564.8 million.
- Operating profit increased by 8% to £376.8 million.
- The company continues to benefit from strong underlying demand for used cars.
Bear Case:
- Jefferies downgraded the stock to ‘Hold' from ‘Buy' and cut the price target significantly to 650p.
- There are significant concerns about the rollout and future pricing strategy of the new Deal Builder product.
- Revenue growth has decelerated to 5% from 14% in the prior year.
- The Autorama division experienced a 12% decline in revenue.
- Supply constraints in the used car market are leading to a reduction in dealer listings.
The share price movement today reflects a market adjusting to new perspectives on Auto Trader's prospects, with the success of Deal Builder and the 2026 pricing strategy now under increased scrutiny, potentially shaping the stock's performance in the coming months.
