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Shares of the online and app-based real estate startup Redfin (RDFN - Free Report) dipped on Tuesday after two firms offered up their initial coverage of the stock.
Redfin’s quiet period, which is the time after an IPO is priced—normally 25 days—where underwriters cannot talk or publish research about the company, came to an end on Tuesday.
The first firm to initiate coverage of Redfin was one of the head underwriters for its IPO, Goldman Sachs (GS - Free Report) . Goldman tagged the real estate startup with a “Neutral” rating out of the gate, and the firm also gave Redfin a price target of $20.00 a share.
Goldman Analyst Heath Terry noted that he is apprehensive about the real estate company’s reliance on brokerage agents. He also voiced concern that Redfin might be forced to discount its prices in order to increase overall transaction growth, which could then in turn negatively affect the company’s profitability.
Oppenheimer also began its coverage of Redfin today, giving the company a price target of $31 a share over the next 12 to 18-months. The firm also assigned an “Outperform” rating for the real estate company’s stock.
The Oppenheimer analysts pointed to a few key factors for offering up their positive Redfin coverage. They noted that Redfin lead agents almost doubled their transaction share of 0.13% in 2014 to 0.24% last year. The firm said that they expect this number to continue to rise.
Oppenheimer referenced the fact that Redfin lead agents completed 34 transactions on average last year, while the average realtor closed just 12. The firm also cited efficiency based on Redfin’s mobile and digital-first focus as a reason for their “Outperform” rating. Redfin’s 1% to 1.5% listings fees, which are 1% lower than what legacy brokers often charge, was also listed as a positive.
The firm said that it expects Redfin’s revenues to grow at a compound annual rate of 24% between 2016 and 2024. Oppenheimer also projects a12% upside potential during the coming 12 to 18-months and open-ended growth potential in the next ten years.
Redfin’s stock price fell 4.90% on Tuesday morning to $26.21 a share after one of its underwriters perhaps planted some seeds of doubt for investors.
Bottom Line
Redfin’s stock skyrocketed in its first week of trading to over $31 per share. However, the initial coverage of the company has been mixed with Goldman providing more cautious coverage, while Oppenheimer noted Redfin’s potentially massive upside potential.
The new age real estate company offers many unique, millennial-focused, and mobile-age perks—including the ability to make offers instantly—that could help the company stand out in the real estate market going forward. But it seems that for now, Redfin investors have backed off slightly as they wait to see how the company’s second-quarter earnings officially shake out on September 7.
Industry
Shares of Realogy Holdings , which owns Century 21, Coldwell Banker, and Sotheby's International Realty, fell marginally on Tuesday. Redfin’s online real estate rival, Zillow (Z - Free Report) dipped 0.70%, while Re/Max (RMAX - Free Report) jumped by 0.84%.
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Why Did Redfin (RDFN) Stock Sink Today?
Shares of the online and app-based real estate startup Redfin (RDFN - Free Report) dipped on Tuesday after two firms offered up their initial coverage of the stock.
Redfin’s quiet period, which is the time after an IPO is priced—normally 25 days—where underwriters cannot talk or publish research about the company, came to an end on Tuesday.
The first firm to initiate coverage of Redfin was one of the head underwriters for its IPO, Goldman Sachs (GS - Free Report) . Goldman tagged the real estate startup with a “Neutral” rating out of the gate, and the firm also gave Redfin a price target of $20.00 a share.
Goldman Analyst Heath Terry noted that he is apprehensive about the real estate company’s reliance on brokerage agents. He also voiced concern that Redfin might be forced to discount its prices in order to increase overall transaction growth, which could then in turn negatively affect the company’s profitability.
Oppenheimer also began its coverage of Redfin today, giving the company a price target of $31 a share over the next 12 to 18-months. The firm also assigned an “Outperform” rating for the real estate company’s stock.
The Oppenheimer analysts pointed to a few key factors for offering up their positive Redfin coverage. They noted that Redfin lead agents almost doubled their transaction share of 0.13% in 2014 to 0.24% last year. The firm said that they expect this number to continue to rise.
Oppenheimer referenced the fact that Redfin lead agents completed 34 transactions on average last year, while the average realtor closed just 12. The firm also cited efficiency based on Redfin’s mobile and digital-first focus as a reason for their “Outperform” rating. Redfin’s 1% to 1.5% listings fees, which are 1% lower than what legacy brokers often charge, was also listed as a positive.
The firm said that it expects Redfin’s revenues to grow at a compound annual rate of 24% between 2016 and 2024. Oppenheimer also projects a12% upside potential during the coming 12 to 18-months and open-ended growth potential in the next ten years.
Redfin’s stock price fell 4.90% on Tuesday morning to $26.21 a share after one of its underwriters perhaps planted some seeds of doubt for investors.
Bottom Line
Redfin’s stock skyrocketed in its first week of trading to over $31 per share. However, the initial coverage of the company has been mixed with Goldman providing more cautious coverage, while Oppenheimer noted Redfin’s potentially massive upside potential.
The new age real estate company offers many unique, millennial-focused, and mobile-age perks—including the ability to make offers instantly—that could help the company stand out in the real estate market going forward. But it seems that for now, Redfin investors have backed off slightly as they wait to see how the company’s second-quarter earnings officially shake out on September 7.
Industry
Shares of Realogy Holdings , which owns Century 21, Coldwell Banker, and Sotheby's International Realty, fell marginally on Tuesday. Redfin’s online real estate rival, Zillow (Z - Free Report) dipped 0.70%, while Re/Max (RMAX - Free Report) jumped by 0.84%.
Zacks' 10-Minute Stock-Picking Secret
Since 1988, the Zacks system has more than doubled the S&P 500 with an average gain of +25% per year. With compounding, rebalancing, and exclusive of fees, it can turn thousands into millions of dollars.
But here's something even more remarkable: You can master this proven system without going to a single class or seminar. And then you can apply it to your portfolio in as little as 10 minutes a month. Learn the secret >>