AutoTrader is the UK's largest online platform for buying or selling new and used cars. It offers a variety of services on the app including seller adverts, insurance, leasing as well as its subscription based models. On average it sees 83 million cross platform views on a monthly basis.
Autotrader had a very strong year so far before its earnings were released on the 29th of May. The share price had rallied in recent weeks leading up to this earnings climbing just under 30% within a month. The earnings report was in line with expectations with a 7% year on year growth to Auto Trader revenue. Despite this earning report in line with expectations, the share price took a dive with Richard Hunter, head of markets at Interactive Investor stating: ‘A strong recent run in the share price has led to some significant investor displeasure at the open, given that the results were no more than in line with estimates and with the outlook containing few positive surprises.’
The share price would fluctuate around its 2025 open of £7.90. In November, the company reported its half-year earnings. Although, on paper, this looked positive such as a 6% rise in operating profit to just over £200 million, a 5% increase in the average revenue generated per retailer and profit margins narrowly increasing to 63%, the share price would fall by 4%. As mentioned within Investor Chronicles report on the earnings, the cause behind this average revenue per retailer was the increase in the price of the average second hand car while growth maintained below its historic average. This may be a problem in the long-run as each user that comes onto AutoTrader makes the online platform less money
Just a week later AutoTrader announced the permanent feature of its ‘Deal Builder tool.’ This sparked outrage for sellers as buyers could now ‘reserve’ a car for just £99. As mentioned in the Car Dealer magazine, ‘Car dealers are concerned that with their stock advertised on multiple platforms, they’ll be letting customers down if they sell it to someone else and cancel the reservation, leading to bad reviews.’ AutoTrader has altered the ‘Deal Builder’ tool to add a ‘Reservation Request.’ This would allow the seller to have the choice whether their cars would be reserved or not in comparison to the previous mandatory reservation. Despite these proposed changes, these reports indicate that ‘hundreds’ of dealers have downgraded or cancelled their subscription.
If AutoTrader can entice both new and previous dealers back onto the platform, it will help to drive that share price back up. AutoTrader has continued to stand for the adoption of this ‘Deal Builder’ tool due to the benefits it offers to both buyers and sellers. The Reservation Request feature is set to roll out within the coming month. Whether this feature is enough to transform the feel of this Deal Builder tool will be an indication to see if a positive reversal is possible within the near future. Fundamentally, AutoTrader continues to see improvement with revenue growth and profit margins also narrowly widening. If it can continue to show its strong financial position it should drive the share price higher. Ultimately it depends on whether or not the adaptations to the ‘Deal Builder’ tool is enough to restore confidence from buyers, sellers and investors.