Real estate has been a bizarre market for the last few years now, and Redfin (NASDAQ:RDFN) has been in the thick of it all. However, Redfin was also down at the time of writing, and it’s thanks to a reconsideration from a major analyst.
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D.A. Davidson, by way of analyst Tom White, cut Redfin’s rating from “neutral” to “underperform,” noting that the proportion of listings that find their way to Redfin’s roster has been on the decline for some time. Now, Redfin is trailing the market, and that doesn’t bode well for its near-term future. Redfin has been steadily working its way toward profitability, and longer-term profitability as well. But with the slide in listings, its ability to maintain that profitable track is looking more and more in doubt.
Worse, that’s not the only problem that Redfin is facing. Redfin is actually, in part, a victim of its own success. That improving profitability track has drawn plenty of interested investors. That, in turn, has sent share prices nicely upward. However, the rallies that Redfin has seen so far are now limiting its ability to advance; effectively, Redfin’s earlier successes are effectively baked into the current share price. Just to top it off, Redfin has already cut jobs on three different occasions, which means it’s not really in a position to step up its listings. It simply doesn’t have the manpower to chase leads and make deals any more. Especially with the population hit hard by rising loan rates.
That likely explains the pessimistic analyst consensus. With six Hold ratings and four Sells, Redfin stock currently rates as a Moderate Sell. Throw in an average price target of $8.09 per share, and Redfin also offers a frightening downside risk of 46.44%.
