On Thursday, DA Davidson increased its price target for Redfin Corp. (NASDAQ: NASDAQ:RDFN) to $7.25, up from the previous $6.75, while keeping a Neutral rating on the stock. This adjustment follows Redfin's first-quarter results for 2024, which surpassed DA Davidson's revenue estimates by approximately 4%. The company's performance exceeded expectations in all operating segments.
Redfin's adjusted EBITDA loss for the first quarter was reported at $(27.6) million, which was slightly better than DA Davidson's estimate of $(31.1) million and the consensus of $(32) million. The net loss for the company was $(66.8) million, which falls within the guidance range of $(72) million to $(65) million provided by the company.
Looking ahead, Redfin's forecast for the second quarter is optimistic, particularly regarding revenue projections, which are driven mainly by a stronger outlook for the core brokerage segment and the mortgage division. The company also anticipates a quarter-over-quarter reduction in adjusted EBITDA loss, suggesting that $2 million in positive EBITDA is achievable at the higher end of their projected range.
Additional positive indicators from Redfin include management's expectation of year-over-year brokerage share gains in the second quarter, despite a year-over-year decrease in the first quarter.
The company also experienced an increase in mortgage attach rates, with March seeing a rate of 30%, excluding all-cash transactions. Moreover, there are further signs of improving profitability within RentPath, a rental listing service acquired by Redfin.
In light of these developments, DA Davidson has revised its revenue forecast for Redfin in 2024, increasing it by roughly 6%. The firm has also reduced its expected adjusted EBITDA loss from $(49) million to $(28) million. The new price target of $7.25 implies a 4x multiple on DA Davidson's 2024 estimated enterprise value to gross profit for Redfin.
InvestingPro Insights
Redfin Corp. (NASDAQ: RDFN) is navigating a challenging market with a current market capitalization of 746.69 million USD. According to recent data, Redfin is trading at a low revenue valuation multiple, which could be of interest to value investors.
The company's revenue for the last twelve months as of Q1 2024 stood at 988.07 million USD, with a notable gross profit margin of 34.66%. Despite a quarterly revenue growth of 5.32% in Q1 2024, the year-over-year revenue growth was negative at -9.42%. This mixed performance is reflected in Redfin's price, which has seen a decline of 21.78% over the last three months.
InvestingPro Tips highlight that Redfin may struggle with profitability this year, as analysts do not anticipate the company will be profitable within this timeframe. Moreover, the company's valuation implies a poor free cash flow yield, which is a factor for investors to consider.
On the positive side, Redfin's liquid assets exceed its short-term obligations, providing some financial flexibility. For those seeking more in-depth analysis, there are additional InvestingPro Tips available at https://www.investing.com/pro/RDFN, which could offer further insights into Redfin's financial health and market position.
Interested investors can take advantage of these insights and many more with a special offer: use the coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription. With 9 more InvestingPro Tips available for Redfin, subscribers can gain a comprehensive understanding of the company's prospects and market dynamics.
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