Headquartered in Seattle, Washington, Redfin Corporation (RDFN) is a technology-powered residential real estate company, redefining real estate in the consumer's favor in a commission-driven industry. The company offers brokerage, iBuying, mortgage, and title services. RDFN serves more than 80 metro areas across the United States.
Consumers can search for homes by neighborhood or city on RDFN’s website, and can refine results using detailed parameters, such as price and number of bedrooms or baths.
On a year-to-date basis, RDFN’s stock has rallied 204.2%, to close yesterday’s trading session at $64.31 after hitting its all-time high of $65.13. This impressive performance and potential upside based on a few factors have helped the stock earn a “Strong Buy” rating in our proprietary rating system.
Here is how our proprietary POWR Ratings system evaluates RDFN:
Trade Grade: A
RDFN is currently trading above its 50-day and 200-day moving averages of $47.21 and $44.38, respectively, indicating an uptrend. Moreover, RDFN has gained 49.8% in the past month, reflecting a solid short-term bullishness.
The company’s revenue climbed 10.9% sequentially to $236.9 million for the third quarter ended September 30, 2020. Its real estate services gross profit increased 70% year-over-year to $91.9 million, yielding a gross margin of 43.8%. And its net income has increased 403.8% year-over-year to $34.2 million. EPS increased 328.6% year-over-year to $0.30.
On December 8, RDFN launched its iBuying service, RedfinNow, in the Seattle and San Francisco metro areas. It is the first major iBuyer to be launched in the locale. The company expanded RedfinNow’s service in the Sacramento area on October 9 and in the Palm Springs area on September 15. The service affords home sellers the certainty of all-cash offers directly from the company, the flexibility to pick their move-out date, and the convenience of selling without any prep work, private showings, or open houses.
Buy & Hold Grade: A
In terms of proximity to its 52-week high, which is a key factor that our Buy & Hold Grade considers, RDFN is well positioned. The stock is currently trading just 1.3% below its 52-week high of $65.13.
RDFN’s net revenue has grown at CAGR of 36.9% over the past three years. This has been driven by consistent expansion into new market areas. RDFN has also introduced several innovations over the years. Two examples are its Apple Watch app, and the Redfin Data Center, which is a free resource for downloadable housing market data.
Peer Grade: A
RDFN is currently ranked #2of 44 stocks in the Real Estate Services industry. Other popular stocks in the real estate services group are WillScot Corporation (WSC), Cohen & Steers Inc (CNS), and CBRE Group Inc (CBRE).
RDFN has comfortably beaten the returns of these popular industry participants over the past year. WSC, CNS, and CBRE gained 27.7%, 12.8% and 11.8%, respectively, over the same period.
Industry Rank: C
The Real Estate Services industry is ranked #65 of the 123 StockNews.com industries. Companies in this industry manage commercial property and act as agents in the buying, leasing, and selling of commercial real estate, in addition to managing nonresidential properties for owners.
With people generally wary of going out, and several companies preferring ‘work-from-home’ by their employees amid the coronavirus pandemic, this industry was initially hit hard earlier in the year. However, with near-zero interest rates as a backdrop, and demand for bigger or better living space growing amid the pandemic, the industry has saw decent growth this year.
Overall POWR Rating: A (Strong Buy)
RDFN is rated “Strong Buy” due to short- and long-term investor bullishness and solid growth prospects, as determined by the four components of our overall POWR Rating.
Bottom Line
RDFN has the potential to soar in the upcoming months despite gaining 200.9% over the past year, based on its continued business growth, favorable earnings and revenue outlook, and strong financials.
RDFN has an impressive earnings surprise history, with the company beating consensus EPS estimates in each of the trailing four quarters. The consensus revenue estimate of $1.24 billion for the next year represents 43.1% growth versus this year. Its EPS is expected to grow at 60.2% in the current year and 80% next year. This outlook should keep RDFN’s price momentum alive in the near term.
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RDFN shares were trading at $67.27 per share on Tuesday afternoon, up $2.96 (+4.60%). Year-to-date, RDFN has gained 218.21%, versus a 15.79% rise in the benchmark S&P 500 index during the same period.
About the Author: Manisha Chatterjee
Since she was young, Manisha has had a strong interest in the stock market. She majored in Economics in college and has a passion for writing, which has led to her career as a research analyst.
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