Shares of real estate disruptor Redfin Corporation (NASDAQ:RDFN) have taken a hit this year, falling more than 20% according to data from S&P Global Market Intelligence. The online real estate brokerage's stock tumbled early in the year as the housing market seemed to slow. There was little direct news out on the company, but concerns about rising interest rates and a cut in the mortgage interest deduction could have prompted investors to sell the stock, especially after shares ripped higher to close out 2017.
As the chart below shows, all of the stock's losses this year came in the first two months.
While much of the January sell-off was momentum-driven, the stock also fell after it reported fourth-quarter earnings in February. The online brokerage posted another round of strong growth with revenue up 43%, to $95.8 million. However, the company announced that revenue growth was expected to slow significantly for the current quarter to just 25%-31% and also called for a wider net loss as it invests in growth initiatives. Redfin continues to expand Redfin Mortgage to new markets, offering lending to homebuyers, and also is upgrading agent software and adding a new premium service for sellers.
Still, the stock fell as much as 10% the day the report came out, though it closed out just 3% lower. Shares traded sideways over the subsequent months as the housing market continued to disappoint, and on April 20, the stock fell 5% as new listings were down 5.6% in March.
However, Redfin beat its own revenue guidance in its first-quarter report in May with a 33% jump in the top line. Investors, however, mostly ignored the report.
There's little question that the real estate market, which is full of inefficiencies and middlemen, is ripe for disruption, and companies like Redfin and rival Zillow are chasing a huge opportunity. While Redfin's results have been disappointing this year, especially as Zillow stock has gained nearly 50%, the company is expanding its reach and gaining market share and name recognition. Considering the opportunity, there should be a long path of growth ahead for Redfin.
Jeremy Bowman has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Zillow Group (C shares). The Motley Fool recommends Redfin. The Motley Fool has a disclosure policy.