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Why Redfin's Shares Are Falling Today

By Joe Tenebruso - Updated May 9, 2019 at 3:48PM

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The discount real estate brokerage's near-term guidance underwhelmed investors.

What happened

Shares of Redfin (RDFN 6.83%) sank on Thursday, following the real estate company's first-quarter results. The stock was down about 15% at 3:22 p.m. EDT today.

So what 

The residential real estate brokerage's first-quarter revenue jumped 38% year over year to $110.1 million. Analysts had expected revenue of only $104 million. 

Redfin's low fees are proving popular with home sellers. That's helping the discount brokerage steadily gain share in the massive U.S. real estate market.

Moreover, Redfin's ancillary services are expanding rapidly. "Demand has been especially strong for mortgage, title, RedfinNow, and our concierge service for painting and staging listings, increasing our conviction that these new services can combine with our brokerage capabilities to let us solve customer problems no other real estate company can," CEO Glenn Kelman said in the company's earnings release. 

A sold sign

More people are turning to Redfin to sell their homes. Image source: Getty Images.

Still, Redfin's growth investments are weighing on its profits. The company generated a $67.2 million net loss, compared with a net loss of $36.4 million in the year-ago quarter. 

Additionally, Redfin's second-quarter earnings guidance fell short of Wall Street's expectations. Management is guiding for a net loss of $11.3 million to $14.7 million.  Analysts were forecasting a net loss of $5.8 million. 

Now what

Despite today's decline, Redfin's future remains bright. Even after years of torrid growth, the company has a less than a 1% share of the U.S. home sale market. But with its disruptive low-cost model fueling its expansion, Redfin's market share -- and by extension, its sales and profits -- could grow exponentially in the years ahead.

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