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Friday - DA Davidson has adjusted its price target on Redfin Corp. (NASDAQ: NASDAQ:RDFN) shares, lowering it to $7.00 from the previous $7.25, while maintaining a Neutral rating. With the stock currently trading at $7.64 and a market capitalization of $947 million, analyst targets range from $4 to $15 per share. According to InvestingPro analysis, the stock is currently overvalued based on its Fair Value calculation. Analysts at the firm revised their estimates after Redfin reported its fourth-quarter results for 2024 and provided an outlook for the first quarter of 2025, which presented a mix of achievements and challenges.
Redfin’s fourth-quarter consolidated revenues were in line with consensus expectations, as was the core Brokerage revenue. With trailing twelve-month revenue of $1.02 billion showing modest growth of 3.7%, the company’s adjusted EBITDA loss of $2.9 million did not meet the guidance range of $1 million to $8 million, nor the consensus estimate of $5 million. The shortfall was attributed to unexpected costs associated with Redfin’s transition to its Redfin Next (LON:NXT) compensation model for agents. InvestingPro data reveals the company has been quickly burning through cash, with negative free cash flow of $142.5 million in the last twelve months.
Despite the financial miss, Redfin noted some positive effects from the transition to the new compensation model, which is expected to influence the company’s market share trajectory. Nevertheless, Redfin’s market share remained unchanged year-over-year in the fourth quarter at 0.72%. Management pointed to increased agent turnover as a contributing factor, particularly among agents in markets with lower home values who decided to leave the platform during the transition period. InvestingPro subscribers have access to 8 additional key insights about Redfin’s financial health and market position, crucial for understanding the company’s trajectory in this volatile period.
DA Davidson’s revised price target reflects the firm’s cautious stance on Redfin’s stock, considering both the company’s recent performance and its future prospects. The analysts underscored the neutral rating by emphasizing the mixed results from the last quarter and the outlook for the upcoming one.
Investors are observing Redfin’s strategic moves and financial outcomes as the company navigates through its business model transition. The market will continue to monitor Redfin’s ability to manage costs and improve its market share in a competitive real estate landscape.
In other recent news, Redfin Corporation reported its Q4 2024 financial results, revealing a larger-than-expected loss per share. The company posted an EPS of -0.29, missing analyst forecasts of -0.24. Despite this, Redfin’s revenue slightly exceeded expectations, reaching $244.3 million, representing a 12% increase year-over-year. The company’s net loss was $36 million, compared to a $23 million loss in the prior year, with total gross margin remaining steady at 34%. In a strategic move, Redfin has entered into a partnership with Zillow (NASDAQ:ZG), which includes a $100 million payment to Redfin and aims to double the number of apartment listings on its sites. The firm has also launched new initiatives such as RedfinNEXT and is restructuring to improve profitability. Looking forward, Redfin anticipates Q1 2025 revenue to be between $214 million and $225 million, with expectations of significant adjusted EBITDA profit in 2025. Analysts from firms like B. Riley and Stephens Inc. have noted the company’s strategic restructuring efforts and partnership with Zillow as potential positive developments.
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