Market Overview

Analyst: Redfin An 'Attractive' Play In Disruption Of The $75B Real Estate Brokerage Industry

Share:
Analyst: Redfin An 'Attractive' Play In Disruption Of The $75B Real Estate Brokerage Industry
Related Z
The Street's Mixed Reaction To Zillow's Q3, One Analyst Says 'Game Over'
Benzinga's Top Upgrades, Downgrades For November 7, 2018
Zillow's Billion-Dollar Seller Lead Opportunity (Seeking Alpha)
Related
Benzinga's Top Upgrades, Downgrades For November 9, 2018
34 Stocks Moving In Friday's Pre-Market Session
Redfin: Don't Expect Too Much (Seeking Alpha)

Zillow Group Inc (NYSE: Z) and Redfin Corp (NASDAQ: RDFN) are two pioneers in the online real estate marketplace. D.A. Davidson initiated coverage on both in a report this week. 

The Analyst

Analyst Tom White initiated coverage on Redfin with a Buy rating and $28 price target. He initiated coverage on Zillow with a Neutral rating and $60 price target.

Redfin Disrupts $75B Industry 

Technology has transformed nearly every industry, but real estate has lagged behind due to the intricacies of the transaction and the lack of transparency between agents, sellers and buyers. 

Several startups are looking to change the current model with flat rate pricing, an initiative that Redfin recently launched: a 1-percent listing fee available in 26 markets that White finds encouraging. 

“We expect the competitively compelling value prop and simplicity of the '1 percent' product to resonate with consumers this year and potentially accelerate RDFN share gains,” the analyst said. 

Redfin is an attractive way to play the disruption of the $75-billion brokerage industry, White said. Redfin offers a compelling value proposition by utilizing technology to streamline the selling process and pass savings on to consumers, he said. Redfin homebuyers save an average of $2,700 per transaction, according to D.A. Davidson. 

Redfin has more than 1,100 lead agents who are W-2 employees of the company and made nearly twice as much in 2017 as their brokerage competitors, White said. Redfin agents use proprietary tools to create a feedback loop between software developers and operations, a key differentiator from traditional brokerage competition, the analyst said.

The company has plenty of room to grow, with just 0.71 percent of the U.S. market share of total home values, up from 0.56 percent last year, according to D.A. Davidson. 

Zillow Well-Positioned In Real Estate's Digital Shift

Zillow is the original real estate disruptor, but with shares up nearly 65 percent over the past 12 months, White said the positives are sufficiently priced into the stock.

“ZG is a pioneer in using technology to bring increased transparency and more efficient/accountable marketing solutions to the real estate industry. Brokerages are now experiencing the follow-on effects of Zillow’s original disruption, with new tech-enabled brokerages gaining market share by providing lower fees and better experiences for consumers/agents,” White said.

This raises some competitive questions for the first time since Zillow purchased Trulia, but White said Zillow’s brokerage-agnostic media model is well-positioned to benefit as real estate continues to shift to digital channels.

“Zillow’s audience leadership of the category remains dominant, and management looks set to remain ahead of the evolving consumer expectations in real estate thanks to a series of recent innovations and a robust product development pipeline." 

Price Action

Zillow and Redfin shares were trading relatively flat on Wednesday. At last check, Redfin was down 0.04 percent and Zillow was up 0.09 percent. 

Related Links:

Goldman Sachs Expands Commercial Real Estate Broker Coverage, Says CBRE, Newmark Are Names To Own

Zillow's Risk-Reward Is Too Good To Pass Up, Analyst Says

Latest Ratings for Z

DateFirmActionFromTo
Nov 2018Morgan StanleyMaintainsEqual-WeightEqual-Weight
Nov 2018ZelmanDowngradesHoldSell
Nov 2018SusquehannaDowngradesNeutralNegative

View More Analyst Ratings for Z
View the Latest Analyst Ratings

Posted-In: DA Davidson Tom WhiteAnalyst Color Price Target Initiation Analyst Ratings Real Estate Best of Benzinga

 

Related Articles (Z + RDFN)

View Comments and Join the Discussion!

Latest Ratings

StockFirmActionPT
ALRMImperial CapitalUpgrades58.0
ANDXSunTrust Robinson HumphreyDowngrades41.0
CMANomuraDowngrades86.0
CSLLongbow ResearchUpgrades122.0
HBANNomuraDowngrades15.0
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.

Cloudera Plummets 40% Following Weak Forecast; Analysts Weigh In On What To Do Next

Mid-Afternoon Market Update: Dow Turns Positive; RMG Networks Holding Shares Plummet