Berenberg has slashed its target price for Auto Trader Group Plc by nearly 20%, citing recent reports of teething issues with the rollout of its Deal Builder customer relationship platform.
The broker lowered its target for the shares from 830p to 665p and kept a 'hold' rating on the stock.
Recent news reports have suggested the rollout of Deal Builder, which began last summer, has faced adoption issues with the car dealer community.
Deal Builder is the company's platform for car dealers that is built to attract committed, purchase-ready buyers and streamline sales conversations, allowing customers to complete as many of the steps of the sales process online before dealing with a dealer directly.
However, a recent survey by the Independent Motor Dealer Association even revealed that many dealers had already cancelled or reduced their packages with Auto Trader due to problems they have experienced with the platform, citing a loss of control over the sales process, and concerns about lead quality.
The reports prompted fellow broker Jefferies to downgrade its rating for Auto Trader from 'buy' to 'hold' last week.
"With Deal Builder acting as a core part of the pricing/product event on 1 April, and dealers' margins remaining tight, the issues are likely to affect [average revenue per retailer] growth in FY27, in our view," Berenberg said.
Berenberg now expects ARPR growth of just 5.2% over FY27, down from an earlier forecast of 7.5% and the consensus estimate of 7.8%.
"The shares now trade on a FY26E P/E of 16.7x, which is a c25% discount to the average of 22x over the last three years. Investors are likely to remain sceptical about these issues, reflected in a lower valuation, until Auto Trader can deliver earnings upgrades, in our view," the broker said.
Auto Trader shares were down 0.6% at 589.82p by 1004 GMT.