Market Overview

5 Reasons KeyBanc Is Waiting For A Better Entry Point In Redfin

5 Reasons KeyBanc Is Waiting For A Better Entry Point In Redfin
Benzinga's Top Upgrades, Downgrades For November 9, 2018
34 Stocks Moving In Friday's Pre-Market Session

Redfin Corp (NASDAQ: RDFN), a provider of residential real estate brokerage services that serves both home buyers and sellers, is considered to be a disruptor in the sector — but that's not enough to make it a buy, according to KeyBanc Capital Markets. 

The Analyst

KeyBanc's Brad Erickson initiated coverage of Redfin's stock with a Sector Weight rating with no assigned price target.

The Thesis

Redfin is gaining "meaningful" market share within the residential real estate market, as it offers a unique approach of using content to drive lead generation, Erickson said in a Monday note. (See Erickson's track record here.) 

The company makes use of an aggressive discount pricing strategy and offers plenty of customer benefits, he said.

Erickson offered five reasons why he shies away from slapping a bullish rating on the stock:

  1. Redfin's content lead will likely narrow over time.
  2. The company's strategy of targeting the high-end market without high-end agents limits upside potential.
  3. A total addressable market analysis suggests the segmented addressable market is closer to $35 billion than the $95 billion overall agent commission pool.
  4. Proprietary checks and conversations with sellers and buyers that have knowledge of Redfin were "only mixed."
  5. The stock's valuation already implies a "sizable premium" versus the company's traditional brokerage pools.

Redfin's stock would be "fairly valued" in the mid-$20s level based on a 3x EV/2019 revenue multiple and the current stock's price already assumes "investors are already well-appreciating the share gains Redfin is achieving," Erickson said. 

Price Action

Shares of Redfin were up 1.90 percent Tuesday morning and are higher by nearly 20 percent since the company's July IPO. 

Related Links:

Redfin, Disrupting Real Estate, Stands Above Its Peers

RBC Highlights Redfin Risks And Rewards

Latest Ratings for RDFN

Nov 2018SusquehannaInitiates Coverage OnPositive
Nov 2018William BlairDowngradesOutperformMarket Perform
Sep 2018MacquarieInitiates Coverage OnNeutral

View More Analyst Ratings for RDFN
View the Latest Analyst Ratings

Posted-In: Brad Erickson KeyBanc Capital Markets Real EstateAnalyst Color Price Target Initiation Analyst Ratings Real Estate Best of Benzinga


Related Articles (RDFN)

View Comments and Join the Discussion!

Latest Ratings

View the Latest Analytics Ratings
Don't Miss Out!
Join Our Newsletter
Subscribe to:
Market in 5 Minutes
Everything you need to know about the market - quick & easy.
Daily Analyst Rating
A summary of each day’s top rating changes from sell-side analysts on the street.
Fintech Focus
Your weekly roundup of hot topics in the exciting world of fintech.
Thank You
for registering for Benzinga’s newsletters and alerts.
• The Daily Analysts Ratings email will be received daily between 7am and 10am.
• The Market in 5 Minutes email will be received daily between 7am and 8am.
• The Fintech Focus email will be received every Friday between 2pm and 5pm.

Funko Shares Plunge To All-Time Low After BMO Downgrade

Think Retail Is Making A Comeback? Citi Suggests O'Reilly And Walmart