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.
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,” said AJ Bell’s Russ Mould.
“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.
“And the current production issues affecting the manufacture of new vehicles mean demand for used cars is very much in the fast lane.
“Limits on the availability of stock are only seen as being a modest speed bump for Auto Trader and CEO Nathan Coe, who took the wheel just as Covid hit, should now have a clearer path to take the business in the direction he wants.”