The stock market wasn't able to sustain the positive mood that investors initially had early this morning. Instead, key indexes deteriorated throughout the day as new concerns about the situation in Ukraine and ongoing worries about economic growth and monetary policy tightening combined to make investors doubt the future. As of 1 p.m. ET on Friday, the Dow Jones Industrial Average (^DJI -1.11%) was down 269 points to 34,043. The S&P 500 (^GSPC -1.28%) had dropped 43 points to 4,337, while the Nasdaq Composite (^IXIC -1.65%) had lost 218 points to 13,497.
Some of the more disruptive companies in the stock market have seen far greater losses over the past few months than the major benchmarks, largely as investors try to guess whether their long-term future can match up to expectations. In the fintech stock arena, real estate technology companies ran into considerable resistance on Friday following key financial reports from Redfin (RDFN -4.01%) and Doma Holdings (DOMA 3.00%). Below, we'll look more closely at the two reports to see what they say about the industry as a whole.
Redfin faces an impossible task
Shares of Redfin fell 25% in midafternoon trading Friday on Wall Street. The tech-powered real estate company continued to see immense growth in its business, but investors seem convinced that Redfin won't be able to sustain its impressive success to date.
Fourth-quarter financial numbers were mixed. Revenue continued to soar, rising 163% year over year to $643 million. However, many investors seemed to focus on weaker margin performance in the real estate services segment, where gross margin dropped 8 percentage points to 33%. Redfin reversed a year-ago gain by posting a $27 million net loss for the quarter, working out to $0.27 per share.
Redfin's full-year financial performance was largely consistent with its quarterly results: 2021 revenue more than doubled to $1.92 billion, but yearly losses ballooned to $110 million, or $1.12 per share.
Shareholders didn't seem to like the way Redfin is doubling down on its iBuying service. First-quarter guidance called for revenue to double again year over year, with considerable contributions from the properties segment juicing the numbers higher. However, losses could be between $115 million and $122 million just for the quarter. That's a big gamble on iBuying, and given that industry peer Zillow Group (Z -4.69%) (ZG -4.89%) decided to exit the space, not every investor seems to agree with Redfin's approach.
Doma takes a hit
Elsewhere, shares of Doma Holdings were also down sharply, falling 27% in midafternoon trading. The smaller real estate industry disruptor also wasn't able to satisfy growth-hungry investors with its fourth-quarter financial report.
Doma heralded results at the high end of its expectations, but growth rates didn't look all that impressive on their face. Total revenue rose just 17% in the quarter to $138 million. Closed-order counts rose 35% as enterprise-related orders nearly quadrupled year over year, but adjusted gross profit fell 9% from the same period in 2020.
Doma has worked to expand its platform's functionality, with the launch of purchase transactions in December, greater transparency for co-signers on closing documents, and new capabilities for the company's escrow product. Geographical expansion to Washington state, Maine, and Mississippi helped broaden the company's reach over the U.S. residential real estate market.
However, the full-year outlook for gross profit of $118 million to $136 million for 2022 would mark a substantial slowdown from 2021's growth pace. That's simply not acceptable to investors in today's stock market, and Doma will have to restart its growth engines more convincingly to regain shareholders' confidence.