Redfin
Overall, Redfin's stock is down by nearly 50% over the last 3 months amid a brutal environment for growth stocks. Adding to selling pressure is tax day on Monday and has created another headwind for some of the stocks that were the best performers in 2020.
Inside the Numbers
In Q1, Redfin reported a loss of $0.37 per share which was above analysts' expectations of a $0.34 loss. However, it was a significant improvement from 2020's Q1 loss of $0.64 per share. Revenue came in at $268 million, topping expectations of $253.3 million. This was a 40% improvement from last year.
The company delivered strong results in terms of other metrics. Its total market share increased by 0.21% to account for 1.14% of existing U.S. homes. The company's gross margins also increased which shows that leverage is increasing with scale. This combination of increasing margins and market share is a good omen of its future profitability.
The company was hampered last year by a lack of agents which prevented it from fully taking advantage of the surge in demand. Management believes it has solved this problem. In Q2, the company expects revenue between $446 million and $457 million, beating estimates at $348.4 million. However, its net loss would expand from $7 million in the quarter a year ago to $32 million to $38 million, or $0.31 to $0.37 per share, significantly worse than estimates of small profit.
Stock Price Outlook
The reaction to Redfin's earnings shows how much the tenor has changed when it comes to growth stocks. In a low-growth, low-rate world, such a miss would be overlooked as the company's growth trajectory remains intact. However, investors are being much more scrupulous and holding high-multiple companies to a higher standard.
However, this dip could be a good long-term entry point in the stock. The stock is down by more than 50% of its peak, yet its long-term story remains just as compelling. Home buying is being disrupted by technology, and Redfin is on the leading edge of this shift. Therefore, investors should consider getting long with a stop at recent lows.
