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Why Redfin Stock Rose 11.6% in February

By Joe Tenebruso - Updated Apr 11, 2019 at 5:14PM

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The discount brokerage is winning in a massive market.

What happened

Shares of Redfin ( RDFN 3.33% ) jumped nearly 12% last month, according to data provided by S&P Global Market Intelligence, as investors grew more bullish on the real-estate company's vast growth potential.

So what

Redfin's stock entered February with strong momentum following a 24% surge in January. Investors appeared to take a more optimistic view of Redfin's prospects after Federal Reserve Chairman Jerome Powell suggested in early January that the central bank would take a more patient approach to interest rate increases. Lower rates help to make mortgages -- and, by extension, housing -- more affordable, which in turn could provide a boost to Redfin's brokerage business.

Then on Feb. 14, Redfin announced strong fourth-quarter results. Revenue surged 30% year over year to $124 million, as Redfin's small but steadily growing share of the massive U.S. housing market increased 10 basis points to 0.81%. 

Additionally, CEO Glenn Kelman highlighted some key competitive advantages that Redfin possesses in the house flipping market during the company's earnings conference call, suggesting that investors may be underestimating this area of its business. 

Check out the latest earnings call transcript for Redfin.

Green toy houses on top of rising stacks of gold coins

Buying and selling houses may be far more profitable for Redfin than many investors currently believe. Image source: Getty Images.

Now what 

Even after a slight pullback in March, Redfin's stock is already up more than 36% in 2019. Yet plenty of gains may still be ahead for investors, particularly if the discount brokerage can continue to expand its share of the $166 billion U.S. real estate brokerage industry in the years ahead.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis – even one of our own – helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.

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