Rolls-Royce has become the poster child for a successful FTSE 100 stock recovery. Left for dead during the pandemic, the engine maker’s share price has exploded higher and made investors juicy returns along the way.

While such turnarounds are very rare, there will always be FTSE 100 stocks that are deeply out of favour, offering contrarian investors a potentially lucrative opportunity. Could Autotrader Group (LSE:AUTO) be one such example?

I ask this because the stock’s crashed 40% since May 2025. And earlier this summer, it hit lows not seen since the pandemic. So sentiment’s very weak here right now.

Why have investors soured on the UK’s leading online vehicle marketplace? There appear to be three reasons.

First, Autotrader reported revenue growth of 4% in the 12 months to 31 March. This was just shy of market expectations and lower than the 7%-10% growth the firm used to put up a few years ago. Indeed, revenue growth fell below 3% in the fourth quarter, something management put down to “difficult trading conditions and retailer feedback regarding our Deal Builder product roll-out”.

This is another thing that’s been hanging over the stock. Traditionally, dealers pay to advertise vehicles on the marketplace then handle the rest themselves. Deal Builder is an attempt to move more of the buying journey online (vehicle reservations, financing, part-exchange valuations, etc). 

Some dealerships revolted, downgrading and/or threatening to cancel subscription packages. While Autotrader has since made changes to this controversial product, the whole debacle has probably still dented investor sentiment. 

Finally, the stock’s been under pressure due to fears about AI’s potential impact on the business model. If more people search for vehicles through ChatGPT and Grok, then Autotrader might lose its iron grip on the market. 

What to make of these risks?

Personally, I’m not too worried about the AI threat. Last fiscal year, the platform’s position actually strengthened, with customers spending 11 times more time on its platform than the nearest competitor (up from 10 times the year before).

We remain committed to using our brand, technology and proprietary data to benefit car buyers and retailers. AI will
significantly enhance our ability to do this.

CEO Nathan Coe

Plus, while the Deal Builder launch was messy, the company reported three times as many customers using the product at the end of March. And it’s converting enquiries into sales at double the rate.

Another Rolls-Royce in the making?

As mentioned, Rolls-Royce-type comebacks are exceedingly rare. The company’s turnaround was driven by a recovery in global travel, cost-cutting, contract renegotiations, and incredible profit margin expansion.

Autotrader isn’t in the same boat. There’s no booming defence market, and due to the maturity of its domestic classified market, revenue isn’t expected to boom while operating margins are already sky-high.

That said, the stock’s going for just 13.5 times forward earnings. And Autotrader still boasts an incredible 63% operating margin. It also plans to return over £1bn to shareholders through share buybacks and dividends over the course of 2026 and 2027.

Weighting everything up, I think Autotrader deserves serious attention after crashing 40%. And it’s not the only undervalued FTSE 100 stock I see around today…

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Ben McPoland has no position in any of the companies mentioned.

The post Down 40%, is this cheap FTSE 100 stock primed for a Rolls-Royce-style recovery? appeared first on The Twelfth Magpie.

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