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Auto Trader set to benefit as pandemic accelerates shift to online buying

Auto Trader share price up by 6.72% during the morning session

Auto Trader (LON:AUTO) has said that the Covid-19 has accelerated a change in the way cars are being bought in the UK.

“There has been a dramatic shift towards buying online,” said Auto Trader chief executive Nathan Coe.

“We now have more buyers than ever turning to Auto Trader to help with their next car purchase,” he said, arguing that his company could stand to benefit from the trend over the longer-term.

The online car seller confirmed its revenue fell by 29% to £263m for the year ending in March, while its profits fell by 37% to £157.4m.

Auto Trader said its results were impacted by free advertising or discounted rates for large periods of 2020 and 2021.

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The group is also restoring its dividend with a 5p final payment, while its share price is up by 6.72% during the morning session.

AJ Bell investment director Russ Mould, who believes the recent results mean Auto Trader could be well positioned going forward:

“The drop in full year profit announced at Auto Trader is firmly in the rearview mirror now as investors focus instead on the buoyant market conditions which are helping to drive a gear change in profitability in the current financial year,” said Mould.

“The profit drop resulted from the discounts and free advertising slots given to clients during the pandemic and this action may well have strengthened and deepened these relationships.”

“This is crucial as Auto Trader’s profit growth is heavily reliant on upselling an increasing range of services to its car dealership customer base.

“The company’s dominant market share means it benefits from a network effect – it is the one most visited by prospective car buyers because it has the most listings. Car retailers are therefore compelled to use its products, reinforcing its position.”

“The company is also working on new innovations like offering guaranteed part-exchange and allowing users to make reservations on vehicles.”

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