What Happened?

Shares of real estate technology company Redfin (NASDAQ:RDFN) fell 5.7% in the afternoon session after Goldman Sachs analyst Michael Ng downgraded the stock's rating from Neutral to Sell. The analyst called out a series of concerns, including the downward pressure that a "lack of home affordability" could impose on the housing market's recovery. Other issues raised include RDFN's reduced take rate due to increased pressure from agent commissions and competition in the advertising business from Zillow.

The stock market overreacts to news, and big price drops can present good opportunities to buy high-quality stocks. Is now the time to buy Redfin? Access our full analysis report here, it’s free.

What The Market Is Telling Us

Redfin’s shares are extremely volatile and have had 69 moves greater than 5% over the last year. In that context, today’s move indicates the market considers this news meaningful but not something that would fundamentally change its perception of the business. 

The previous big move we wrote about was 11 days ago when the stock dropped 27.6% on the news that the company reported weak third-quarter earnings which fell short of Wall Street's expectations. The number of brokerage transactions missed and EBITDA fell short of Wall Street's estimates. The challenging operating environment, characterised by fluctuating mortgage rates and aggressive competitor ad spending, further weakened the performance. As a result, EBITDA guidance came in below expectations, throwing some cold water on the solid revenue guide. Overall, this was a weaker quarter.

Redfin is down 19.6% since the beginning of the year, and at $7.94 per share, it is trading 45% below its 52-week high of $14.45 from September 2024. Investors who bought $1,000 worth of Redfin’s shares 5 years ago would now be looking at an investment worth $394.31.

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