What happened
Shares of Redfin (RDFN -2.72%) were climbing on Thursday after the company reported its third-quarter financial results late yesterday. The company missed analysts' top- and bottom-line estimates, but investors are likely reacting to the fact that Redfin said yesterday that it's exiting its iBuying (instant buying) business and significantly reducing its workforce.
The real estate company's stock was up by 40% as of 12:04 p.m. ET today.
So what
Redfin released its third-quarter results after the closing bell yesterday and reported an adjusted loss of $0.83 per share, which was far worse than the $0.20 loss in the year-ago quarter, and it missed analysts' consensus estimate of a loss of $0.80.
The company's revenue increased by 11% to $600.5 million in the quarter, but also fell below Wall Street's average estimate of $602.8 million.
Investors mostly ignored those results today and instead focused on the news that the company will close its RedfinNow iBuying business to cut costs. As a result, 13% of its staff -- 862 workers -- will be laid off.
The announcement follows Redfin's previous decision to cut 8% of its workforce back in June.
Image source: Getty Images.
CEO Glenn Kelman said in a press release: "Laying off 862 colleagues and friends is heartbreaking. But I feel relief about closing RedfinNow with relatively low losses."
Kelman added that home prices will stabilize at some point, "but the cost of capital isn't going back to 2021 levels any time soon," and rising costs have been dragging down the RedfinNow business.
Now what
Management issued guidance for the fourth quarter, with revenue estimated to be in the range of $430 million to $459 million, down 31% at the midpoint.
The company also expects its losses to widen to a range between $118 million and $134 million, worse than the loss of $27 million in the year-ago quarter.
"Housing companies are in the jungle now, but Redfin has been there before and come out stronger," Kelman said.
And while the company is clearly suffering as the housing market significantly slows down, investors appeared optimistic today that exiting its iBuying business was the right move.
