What happened

Shares of digital real estate company Redfin (RDFN 8.49%) plummeted 36% in August according to data provided by S&P Global Market Intelligence. It let shareholders know that it won't meet its goals of reaching adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) profitability on time, and it lost market share in the second quarter of 2023.

So what

Redfin operates a digital real estate platform, and since the housing market has tanked, Redfin's business has suffered. But the stock price has been declining since 2021, after Redfin went back to losses after briefly becoming net profitable. 

A 21% decline in the 2023 second quarter wasn't too much of a disappointment considering the environment. It's also been making progress in profitability despite the continued sales declines. Net income improved from $78 million last year to $27 million this year in the second quarter, and it has improved sequentially. The stock price already reflects the dismal housing market, and revenue and income beat expectations. But there were other parts of the report that left investors wanting.

CEO Glenn Kelman gave investors some disappointing news in the second-quarter report. He said that Redfin would reach EBITDA profitability on an adjusted basis "over the next 12 months," and not in 2023, which was the original target. It also lost market share -- from 0.83% last year to 0.75% this year. To be fair, that came from tightening its agent business and closing down its iBuying business. But it was still received negatively.

As for the rest of the outlook, management expects revenue to decline about 11% year over year in the third quarter with a net loss of $21 million to $30 million, another improvement from $90 million last year.

Now what

This is big setback for Redfin, whose stock was already down from highs and is now 90% off of its highs from 2021. It has been creeping back up since the worst of the fallout was already priced into the stock, and it's still up 118% for the year as investors began to buy on the dip.

At the current price, Redfin stock trades at only 0.6 times trailing-12-month sales. It could end up being a real bargain when the housing market gets back up to speed if you buy it now. Redfin is making the right moves to become more efficient, and when sales increase, it will be well positioned to produce profits. But buying now comes with risk, and investors shouldn't expect the stock to skyrocket in the near future.