Shares of Redfin Corp. saw an increase on Thursday, following an upgrade from a prominent analyst. Tom White at D.A. Davidson raised his rating on the stock from sell to neutral, citing improved valuation and positive signs of increased listing share.
Despite a 7.1% drop in pending home sales in August, worse than anticipated by the market (which predicted a 1% decline), Redfin Corp.'s stock (RDFN, +0.43%) rose 1.1% in afternoon trading. This upward trend follows a 1.5% bounce on Wednesday after hitting a 5 1/2-month closing low on Tuesday.
In a note to clients, White acknowledged the significant decline of Redfin Corp.'s shares by 55% since July 12th (compared to the Nasdaq's 5% decline in the same period) and highlighted that this has resulted in a more balanced risk/reward ratio for the stock.
It's worth noting that White chose July 12th as a reference point instead of the stock's closing price of $17.01 on July 13th. This decision was based on his recommendation on July 12th for investors to sell due to an excessive rally.
Additionally, White's research indicates that Redfin Corp. has steadily gained market share over recent months.
Overall, the upgraded rating, along with improved valuation and signs of increased listing share, reflect a more positive outlook for Redfin Corp.'s stock moving forward.
Redfin's Share of U.S. For-Sale Home Listings Sees Small Increase
An analysis conducted by our team reveals that Redfin currently holds a 0.29% share of all for-sale home listings in the United States. This amounts to 3,483 Redfin listings out of a total of 1.18 million listings. These numbers demonstrate a slight increase from the 0.26% share reported in early July, as well as the 0.24% share tracked in late May.
While the increase may be modest, it is a positive development that aligns with Redfin Chief Executive Glenn Kelman's previous statement in August, where he asserted that the housing market had reached its lowest point during the summer.
This recent upgrade by our analyst, along with Gordon Haskett's Robert Mollins raising his rating on Redfin's stock to hold after a period of underperformance, reflects a more balanced risk/reward dynamic for the company's stock following a recent selloff.
Although we maintain cautiousness regarding the overall performance of the housing market, this shift in stance demonstrates a more favorable outlook for Redfin. This sentiment is echoed by the majority of the 16 analysts surveyed by FactSet who cover Redfin, with only two remaining bearish while the remaining 14 remain neutral.
It is important to note that Redfin's stock has experienced a significant decline of 49.1% over the past three months. However, it is worth highlighting that the stock has still achieved an impressive year-to-date increase of 66.4%. In comparison, the Nasdaq Composite COMP has risen by 26.2% this year, while the S&P 500 SPX has advanced by 12.1%.
