Susquehanna cuts Redfin stock price target to $7 from $10

On Monday, Susquehanna analysts adjusted their outlook on Redfin Corp. (NASDAQ:RDFN), reducing the company’s price target from $10.00 to $7.00 while maintaining a Neutral rating. The decision comes as Redfin faces ongoing challenges in a tough macroeconomic environment, particularly notable in the fourth quarter. Currently trading at $6.67, the stock has declined over 15% in the past week, according to InvestingPro data. The company anticipates these difficulties will continue throughout 2025, with analysts not expecting profitability this year.

Redfin is also looking to ramp up its marketing expenditures in the first quarter as a strategic move to capture greater market share. However, this increase in spending is expected to temporarily affect the company’s profitability. InvestingPro analysis shows the company’s financial health score is currently rated as WEAK, with a negative EBITDA of $106.8M in the last twelve months. Despite the current market uncertainties that have led analysts to take a cautious stance, they recognize Redfin’s potential to expand its core business into new markets and to capitalize on higher-margin segments.

The company’s strategic efforts to grow and improve are acknowledged, yet the housing market’s unpredictability is a significant factor in Susquehanna’s neutral position. While Redfin is taking steps to increase its presence and performance, the anticipated impact on short-term profitability is a key consideration for the analysts at Susquehanna in setting the new price target.

This adjustment reflects the analysts’ assessment of Redfin’s financial outlook and market strategy in the face of broader economic challenges. The company’s plans to invest in marketing to drive share gains are seen as a double-edged sword, with the potential for both growth and near-term profit pressures. InvestingPro data reveals concerning metrics, including a return on equity of -120.72% and potential challenges with debt payments. For deeper insights into Redfin’s financial health and future prospects, investors can access the comprehensive Pro Research Report, available exclusively to InvestingPro subscribers.

As Redfin navigates the current economic landscape, it is clear that the company’s actions and the housing market’s response will be closely watched by analysts and investors alike. With a revenue growth of 6.79% in the last twelve months but continued profitability challenges, the company’s trajectory remains uncertain. The revised price target by Susquehanna serves as an indicator of the cautious optimism and realistic challenges that lie ahead for Redfin in the evolving real estate sector.

In other recent news, Redfin Corporation reported its fourth-quarter 2024 earnings, revealing a larger-than-expected loss per share of -$0.29, missing the forecast of -$0.24. Despite this, Redfin’s revenue slightly exceeded expectations, reaching $244.3 million, marking a 12% increase year-over-year. The company’s adjusted EBITDA loss of $2.9 million did not meet the guidance range of $1 million to $8 million, attributed to unexpected costs from transitioning to the Redfin Next (LON:NXT) compensation model for agents. DA Davidson responded by lowering its price target for Redfin to $7.00, while maintaining a Neutral rating, citing mixed results and future prospects. Redfin’s market share remained flat at 0.72% year-over-year, with increased agent turnover noted during the transition period. Looking forward, Redfin anticipates first-quarter 2025 revenue between $214 million and $225 million, with plans to increase marketing spend, particularly in its rental segment. The company is also focusing on profitability and market expansion through initiatives like the RedfinNEXT program and a partnership with Zillow (NASDAQ:ZG).

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