Please ensure Javascript is enabled for purposes of website accessibility

Why Redfin Stock Rallied on Friday

By Joe Tenebruso – Updated May 8, 2020 at 9:06PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

The real estate services provider is growing at a rapid clip.

What happened

Shares of Redfin (RDFN 4.78%) popped 8% on May 8, following the release of the discount brokerage's first-quarter results. 

So what 

Redfin's revenue surged by 73% year over year to $191 million. Its gross profit, meanwhile, soared 368% to $3 million, as its real estate gross margin improved to 14% from 6% in the year-ago quarter. 

Redfin is rapidly gaining share in the massive U.S. housing market, thanks in part to its internet-based platform -- which is proving particularly valuable during the COVID-19 crisis -- and the hefty cost savings it often provides to its customers.

"Real estate commerce has probably virtualized itself more in the past two months than it had in the prior 20 years," Redfin CEO Glenn Kelman said in a press release. "This makes Redfin's technology advantage over other brokers more important than ever."

A person in a business suit sitting behind a table that has miniature houses on top of rising stacks of gold coins on it

Redfin is taking share from its rivals. Image source: Getty Images.

Now what

Redfin continues to generate operating losses as it scales its business, but with such an enormous growth opportunity still ahead -- its market share of U.S. existing home sales is still less than 1% -- management is wisely prioritizing expansion over profitability. As long as Redfin can steadily increase its market share of the $80 billion U.S. real estate brokerage industry, long-term investors should continue to be rewarded.

Joe Tenebruso has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Redfin. The Motley Fool has a disclosure policy.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Redfin Corporation Stock Quote
Redfin Corporation
RDFN
$6.14 (4.78%) $0.28

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
327%
 
S&P 500 Returns
105%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 09/27/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.