The Nasdaq-100 index hosts 100 of the largest technology companies in the world, so it's often referred to as a benchmark for the tech sector's performance. After plunging 33% in 2022, it's off to a 11% gain this year.

That fits well with the index's history. Since its inception in 1985, the Nasdaq-100 has declined in consecutive years on only one occasion, during the dot-com bust between 2000 and 2002. That bodes well for positive returns in 2023. 

Investors have to contend with persistently high inflation and rising interest rates before the broader stock market rockets higher. But there have been clear signs inflation peaked in June 2022, and that means we might be only a few months away from the U.S. Federal Reserve's peak interest rate.

The real estate sector could be one of the biggest winners if that scenario plays out, and here's why Redfin (RDFN 2.48%) offers a great way for investors to benefit -- especially since the stock is trading 91% below its all-time high.

Redfin is refocused and reenergized

Last year was transformational for Redfin. A slowing real estate market plunged the company into a fight for survival, forcing drastic changes to its business. Management answered the call, and Redfin is now a much leaner operation, but more importantly, it has returned to focusing on what it does best.

That is real estate brokering. Redfin has 2,022 lead agents on its roster, and they serve 98% of the U.S. population by geography, a level of scale that independent firms can't compete with. As a result, Redfin is able to charge listing fees of just 1% compared to the industry standard 2.5%, and the company says it has saved sellers over $1 billion since its inception.

But as the real estate market soared in 2020 and 2021, Redfin leaned into iBuying (direct buying) with its RedfinNow segment, to capture more growth. Direct buying involves purchasing homes directly from sellers and then trying to flip them for a profit. It's very lucrative when home prices are climbing, but when the market turns, holding an inventory of hundreds of houses can quickly result in a financial catastrophe.

Redfin's key competitor, Zillow Group, learned that the hard way. It shuttered its iBuying business in 2021 and ate hundreds of millions of dollars in losses.

RedfinNow was a smaller and somewhat more selective operation, so it avoided a similar fate. Management was winding down the segment toward the end of 2022, and it has just 19 homes remaining in its inventory.

That's going to hurt Redfin's revenue in 2023

Each time RedfinNow sold a home, the value of the sale was counted as revenue, and the segment was responsible for 52% of Redfin's $2.28 billion in total revenue during 2022. Its absence is going to leave a major hole in the company's financials that brokering and real estate services won't be able to fill anytime soon. 

Wall Street analysts are already betting Redfin's total revenue could halve to just $1.1 billion in 2023. But that's not necessarily a bad thing, because RedfinNow was clearing out its inventory of homes at a lesser price than it paid for them, which was a major drag on overall earnings.

But with RedfinNow eliminated, the company thinks it could achieve profitability this year on the basis of adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA). It will begin this journey from a position of strength: Its broker business reached an all-time-high market share in 2022, as Redfin was responsible for selling 0.8% of all homes across the U.S. by units sold.

Also, Redfin entered the mortgage business five years ago, and it's now quickly ramping up. It originated $4.3 billion worth of mortgages during 2022, a 337% increase compared to 2021. The company is now attaching a mortgage to approximately 17% of all homes it sells, and it continues to build momentum in this new segment, particularly with its recent acquisition of Bay Equity Home Loans. 

Redfin stock might be a great value

Given the 91% decline in its stock price from its all-time high, investors currently value Redfin's business at just $915 million.

That means the stock trades at a forward price-to-sales (P/S) ratio of less than 1 based on its projected 2023 revenue. And after accounting for the $362 million in cash, equivalents, and short-term investments on its balance sheet, Redfin's P/S of 0.5 looks even more attractive. That's a long way from its peak P/S of 7.7 in 2020.

There are two key tailwinds that could work in the stock's favor. First, if inflation truly has peaked and interest rates follow later this year, that could invite new demand for homes. Since Redfin's brokerage business is commission-based, any rise in the value of real estate will boost the company's revenue. Second, if the Nasdaq-100 index continues to recover, Redfin stock could attract a higher P/S as risk appetite returns among investors.

In any case, Redfin stock offers an intriguing risk-reward proposition for investors right now.