Please ensure Javascript is enabled for purposes of website accessibility

Why Redfin Stock Lost 17% in August

By Jennifer Saibil – Sep 3, 2021 at 8:18AM

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 tech company is growing quickly, but the stock price was growing faster.

Real estate technology company Redfin's (RDFN -4.80%) stock lost 17% of its value in August according to data provided by S&P Global Market Intelligence. The housing market might be cooling off after record-high prices, and Redfin stock might be cooling off after gaining 250% in 2020, and another nearly 40% by March 2021. 

At the beginning of August, the company posted outstanding second-quarter growth, but it wasn't enough to stop the stock from dropping.

A family standing in front of a house.

Image source: Getty Images.

So what

Redfin is a leader in the real estate technology boom, and it posted almost 50,000 transactions in the first half of 2021 as of the end of the second quarter, or about a 48% increase year over year. Sales grew 121% in the second quarter, and market share increased by 0.24%. It recently acquired rental tech company RentPath to expand its services and offer a more complete real estate package.

The company is in high-growth mode, and it's dealing with growing pains, such as finding enough agents. It's aiming to be a one-stop shop for all of a client's house-buying needs, offering brokerage services, sales, rentals, titles, mortgages, and renovations. A fluctuating housing market makes it more challenging to sort it all out, but Redfin is thriving regardless.

Net loss widened in Q2 due to the RentPath acquisition as well as costs related to marketing and hiring. Redfin's in the thick of its early growth phase, which impacts profitability. However, it is guiding for improved profitability in the third quarter. It's also guiding for sales to grow between 124% and 128% year over year. Housing prices may be starting to decrease, but there's more for sale as people are getting out of their houses again, benefiting Redfin.

Now what

Redfin has the potential to grow into a huge company and reward investors accordingly. It faces competition from Zillow Group and other real estate technology companies, but it's growing quickly, is a cheaper alternative to traditional real estate agents, and offers a large suite of services that appeal to clients looking for an easier and more affordable way to buy a home. Quarterly revenue remains less than $500 million, giving investors the opportunity to buy shares before it explodes. But expect volatility in the near future.

Jennifer Saibil has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Redfin, Zillow Group (A shares), and Zillow Group (C shares). The Motley Fool recommends the following options: short August 2021 $65 puts on Redfin. The Motley Fool has a disclosure policy.

Stocks Mentioned

Redfin Stock Quote
Redfin
RDFN
$4.76 (-4.80%) $0.24
Zillow Group Stock Quote
Zillow Group
ZG
$35.05 (-3.60%) $-1.31
Zillow Group Stock Quote
Zillow Group
Z
$35.62 (-3.52%) $-1.30

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

Related Articles

Premium Investing Services

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