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UBS upgrade helps drive shares in Autotrader higher, with a change up to ‘neutral’ on valuation grounds

In a note to clients, UBS’s analysts pointed out: “Since their FY17 results on the 8th June, Autotrader’s share price has underperformed the FTSE100 by 13%”
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But, they added: “With the current share price now implying a c5% 2017-26 revenue CAGR, we think this revenue growth is achievable and therefore we upgrade "

An upgrade from UBS helped drive shares in online car dealing firm Autotrader Group PLC (LON:AUTO) higher today, with the Swiss bank upping its stance to ‘neutral’ from ‘sell’ on valuation grounds.

In a note to clients, UBS’s analysts pointed out: “Since their FY17 results on the 8th June, Autotrader’s share price has underperformed the FTSE100 by 13%.”

READ: Auto Trader shares fall on car market worries, despite tripled dividend on solid full-year profit growth

They added: “While we did cut EPS estimates slightly (1-2%) post results, we believe the sell-off is due to concerns over UK consumer, Amazon and a drop in used car transactions.”

The analysts said: “Our initial Sell call was based on our view that expectations for 7-8% 2017-26 revenue CAGR were too high.”

But, they added: “With the current share price now implying a c5% 2017-26 revenue CAGR, we think this revenue growth is achievable and therefore we upgrade our recommendation.”

In mid morning trading, Autotrader shares were 2.5%, or 8.8p higher at 367.7p, with UBS maintaining a 12 month price target on the stock of 375p.

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