What happened
The housing market might be persistently frothy despite economic concerns, but we can't say the same for Redfin (RDFN 6.79%) stock on Monday. The company's shares had an inglorious start to the work week, falling nearly 11% after an analyst downgraded his company's recommendation on the online real estate listings company.
So what
The downgrader was Wedbush Securities' Jay McCanless, who took over his company's coverage on Redfin stock. In taking the reins, he promptly reduced Wedbush's official recommendation on the stock to neutral from the previous outperform (read:buy). In doing so, McCanless chopped the price target on the shares to $9 apiece; formerly, the price was $14.
We are in the middle of one of the great bull markets for housing; as such, the analyst feels -- with some justification -- that Redfin as a company should have performed better last year. It currently has a lengthening bottom-line loss streak going and landed in the red in all four of its reported 2021 quarters.
McCanless is also concerned with Redfin's dive into the mortgage market. This is likely to constrict due to the Federal Reserve's recent interest rate hikes. Many pundits believe more increases are on the way. The analyst wrote that Redfin's involvement in this lively corner of the real estate business is "a poorly timed decision in hindsight."
Now what
McCanless certainly nails several points of concern with Redfin's business. He did add the caveat that the company has promised increased data disclosure in the near future. Hopefully, this will clarify its performance in various business segments, including those mortgages the prognosticator was concerned about.
