Following months of selling, top broker tips 45% upside for the REA share price

REA shares could be great value after recent weakness…
The post Following months of selling, top broker tips 45% upside for the REA share price appeared first on The Motley Fool Australia. –

On Friday, the REA Group Limited (ASX: REA) share price was sold off following the release of the property listings company’s third-quarter update.

The company’s shares were down as much as 9% to a 52-week low of $110.68 before recovering slightly to end the week at $112.15.

This means the REA share price is now down 35% since the start of the year.

Is the weakness in the REA share price a buying opportunity?

One leading broker that believes investors should be taking advantage of this weakness is Goldman Sachs.

According to a note from this morning, the broker has reiterated its buy rating with a trimmed price target of $164.00.

Based on the current REA share price, this implies potential upside of 46% for investors over the next 12 months.

What did the broker say?

Goldman Sachs acknowledges that REA missed its third-quarter estimates last week due to a greater than expected deterioration in the macro trends.

However, its analysts feel investors should look beyond this. They believe this is a short term headwind that will eventually turn into a tailwind for growth in the future.

The broker explained:

“REA revenues were -7% vs. GSe, given a greater than expected deterioration in the macro trends across its Rental (GSe c.10% of revenues) and Commercial and Developer businesses (14%) during the quarter. This offset the estimated +24% growth in its Residential ‘For-Sale’ business (+11% volume, +8% price and +5% depth).

Although this weakness is impacting FY22 earnings, as it relates to macro factors that will ultimately normalise in future periods, we believe it is only timing related, and will provide another tailwind to growth in future periods that will be impacted by macro weakness in ‘for-sale’ listings.”

Furthermore, the broker believes there are other tailwinds that will be supportive of strong future growth.

“When combined with continued pricing tailwinds and strong depth uptake (across existing and new products), we remain positive on REA’s ability to deliver sustainably strong earnings growth – forecasting +8% growth in FY23 (impacted by for-sale listings/India), accelerating to +11% in FY24.”

All in all, the broker feels this makes the REA share price a very attractively priced option at the current level.

The post Following months of selling, top broker tips 45% upside for the REA share price appeared first on The Motley Fool Australia.

Should you invest $1,000 in REA right now?

Before you consider REA, you’ll want to hear this.

Motley Fool Investing expert Scott Phillips just revealed what he believes are the 5 best stocks for investors to buy right now… and REA wasn’t one of them.

The online investing service he’s run for over a decade, Motley Fool Share Advisor, has provided thousands of paying members with stock picks that have doubled, tripled or even more.* And right now, Scott thinks there are 5 stocks that are better buys.

*Returns as of January 13th 2022

More reading

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Why Macquarie, REA, Temple & Webster, and Xero shares are sinking
ASX 200 midday update: Macquarie and REA updates disappoint
REA share price sinks 9% to 52-week low following Q3 update
Buy these 2 impressive ASX shares in May 2022: experts

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has recommended REA Group Limited. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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