ZURICH (dpa-AFX) - Anyone looking to add shares from the European online classifieds marketplace sector to their portfolio should take a close look, according to the major Swiss bank UBS. Dwindling tailwinds, increasing competition, structural changes and cyclical pressure call for new strategies and a strong market position.

In his study published on Thursday, analyst Jo Barnet-Lamb lists a number of important factors that investors should take into account when making their choice in the face of growing economic uncertainty and makes some changes to previous investment assessments.

The British company Rightmove, which is active in the real estate market, is his "Top Pick". He rates the share accordingly as a "Buy" and sees the target price at 688 pence. He downgraded the share of the British car dealer Auto Trade, which was recently rated "Neutral", to "Sell" and sees the target price at 613 pence after 640 pence previously.

Scout24 , on the other hand, was upgraded to "Neutral" and given a target price of EUR 66, after the shares had previously been rated "Sell" with a target price of EUR 54.30. The shares of the Norwegian operator of classifieds portals, Adevinta, were downgraded to "Neutral" and the target price was reduced from 115 to 109 kroner.

According to Barnet-Lamb, operators of online classifieds marketplaces are struggling with the loss of the tailwind that the migration from print to online ads gave them more than a decade ago. Digital penetration is already very advanced in the most important markets in Europe - especially in the UK. Of the four companies he analyzed, only Adevinta and, to a lesser extent, Scout24 were still able to benefit from this tailwind. In the UK, on the other hand, migration is already in the 90 percent range.

It is therefore important for online portal operators to focus on monetization, i.e. how much more of their customers' turnover or profit pool they spend on classifieds. New growth paths are also important. He sees healthy scope for monetization at all four companies, although he considers the upside potential at Adevinta to be greater than at Auto Trader and Rightmove. Scout24 is in the midfield in terms of the intensity of monetization.

As the competitive positions play an important role in monetization and customer loyalty, Barnet-Lamb also examined these. Here he concludes that Rightmove and Auto Trader are ahead in their areas, which gives them strong pricing power. "Scout24 is also a clear market leader, but less dominant than Rightmove," he concludes.

In order to continue to grow, online marketplace operators are also trying to penetrate "adjacent areas". New "adjacent" products and services are intended to increase their reach and customer base. He praised the fact that "all companies have made considerable progress in adjacent areas."

Last but not least, the UBS expert also points to cyclical risks and the "ecosystem stability" in the sector. Against the backdrop of rising interest rates and high inflation as well as the slowdown in the global economy, cyclicality is also coming more into focus. In addition, customers, such as real estate agents and used car dealers, are exposed to long-term structural changes, which also have an impact on marketplace operators.

In view of all these driving and braking factors for the sector, Barnet-Lamb considers Rightmove to be particularly attractive. In addition to the favorable share valuation, he points above all to the growth in the core business, which can withstand cyclical downturns. The service provider's new strategy for real estate listings should also noticeably accelerate earnings growth. Auto Trader, on the other hand, is most susceptible to short-term cyclical pressure and longer-term structural changes. However, the high valuation of the share does not reflect this.

For Scout24, the analyst assesses the long-term growth opportunities positively, but sees short-term risks, for example due to a deterioration in the economic environment and possibly too high analysts' expectations. In addition, the shares are coming out of a phase of prolonged above-average price increases.

Adevinta benefits from its superior growth profile, as the company was an early player in the online classifieds market. However, the Norwegian company's share price is currently not dependent on fundamentals, partly due to a takeover bid from financial investors Permira and Blackstone.

With its "Buy" rating, UBS assumes that the total return on the share (price gain plus dividend) will be at least six percent above the market return it expects over the next twelve months. With a "Neutral" rating, the total return over the next twelve months is expected to be up to six percent above or below the expected market return. At "Sell", the total return is expected to be at least six percent below the market return expected by UBS./ck/jsl/he

Analyzing institute UBS.