Back in April 2023, the whole market was bearish, especially in the real estate industry however, our AI market prediction technology using big data predictive analytics found a gem of a stock everyone else seemed to ignore.
In fact, our public prediction was perhaps the only public bullish sentiment on the stock during this time as the stock traded near its 52-week low. With interest rates being raised over and over again for over a year, the real estate market looked like a graveyard, where you could hear the crickets chirping. With interest rates aggressively rising without an end in sight, (almost) no one was crazy enough to take out a mortgage during this time. It was only several months later in June did the Fed decide to postpone hiking interest rates due to significant drops in inflation.
Needless to say, only subscribers of growthtech.ai getting enhanced market intelligence and AI-powered insights to recognize this tremendous market opportunity literally everyone else overlooked. With a 72.51% profit in only 3 months, who's laughing now? Our subscribers are smiling ear to ear with this huge winning stock pick. Don't forget this was a public stock prediction that was provided to the public for free. Redfin was repeatedly recommended to subscribers over several days in multiple time frames highlighting how big of an opportunity it was. In fact, RDFN was the number 2 stock pick in the 90-day time frame on March 29th, 2023.
RDFN Stock Forecast Review
One of the main advantages of using stock predictive software is its ability to objectively study a large number of assets throughout the day. By integrating big data analytics with our AI prediction system, we can enhance decision-making, forecasting, result modeling, and market understanding. Referred to officially as a Decision Support System (DSS), it is intended to help you increase precision, make quicker decisions, and receive unbiased analysis and risk management, thus enhancing market research efficiency and portfolio adaptability.
However, it is essential to note that these systems still require proper human oversight, meaning that your own due diligence is still required. These signals should not be used as your sole discretionary decision-making factor, but instead, act as an effective tool to drastically reduce the time it takes for you to find new market opportunities.
So for example, here it's recommending RDFN. Now with this bullish signal above as your starting point, you would then do your own due diligence to come to your own conclusions based on your own considerations. Take note that these stock predictions do not take into account elements such as your trading background, individual aims, and ambitions, financial situation, or risk tolerance and should not be considered investment advice.
Company Overview of Redfin
As Redfin competes with both traditional brokerages and other technology-driven companies for market share in the real estate industry, RDFN has had to differentiate itself from competitors by emphasizing its technology-driven approach, providing superior customer service, and offering competitive pricing. The company provides a digital platform that connects homebuyers and sellers with local real estate agents, facilitating the buying and selling process.
As a company that operates in the real estate industry, Redfin's financial performance is highly dependent on the overall health of the housing market. The housing market is influenced by a range of macroeconomic factors, including interest rates, unemployment levels, and general economic conditions. For example, when interest rates are low, it becomes more affordable for consumers to obtain a mortgage and purchase a home, which can increase demand for Redfin's services. Conversely, when interest rates are high, it can become more expensive for consumers to borrow money for a mortgage, which can reduce demand for Redfin's services. The financial industry has been shaken by disruptions caused by some commercial banks' inability to manage risks amidst increasing interest rates. However, despite these issues, the Federal Reserve has continued to prioritize reducing inflation, which implies that interest rates may remain high in the short term. This means the mortgage market and potential economic slowdown will likely continue to put pressure on housing prices for several months ahead.
Despite these challenges, as significant as they may be, RDFN, is still currently a buy. This is driven by several strengths the company has that outweigh the risks associated with the stock.
The Fed’s Fight Against Inflation Wages On But For How Long?
After slashing interest rates to zero for an extended period the Fed finally decided to start fighting creeping inflation, which recently ended up creating one of the worst banking crises since 2008. Starting with the very recent infamous bank run of Silicon Valley Bank and several other smaller banks has to lead significant losses and the biggest hit to faith in the American banking system for quite some time. But this article is not about SVB or the other impacted banks and its fallout but how the Fed handles inflation by increasing interest rates which do impact the real estate market and RDFN’s future projected stock value in particular.
Since the Fed “declared war on inflation”, which had reached four-decade highs – it prompted a steady rise in mortgage rates. As a result of the Federal Reserve's historically significant attempt to control inflation, home prices have been declining. Due to the rise in mortgage rates brought on by this conflict over the past year, many prospective homeowners are now unable to afford to buy a property. Usually, when demand declines, supply increases and prices decline. Yet, fewer properties are coming up for sale since many homeowners are choosing to remain in their homes which has kept the supply of available homes persistently low.
The 12-month percentage change in the Consumer Price Index (CPI), a six percent increase in prices in February 2023 when compared to the same month in 2022. This data reflects the average inflation rate across U.S. cities, and the inflation rate is an economic indicator that measures the rate of increase in prices over time. While this is a significant reason to be concerned, there are also some positive signs you should take note of.
The first quarter of the year saw a surge in home buyers in the housing market as they sought to take advantage of certain weeks of lower mortgage rates before they were anticipated to rise again. This resulted in a highly competitive quarter in terms of home-buying activity, which was one of the most active periods since the pandemic began.
Interestingly, while rising mortgage rates usually lead to declining list prices for homes, the opposite occurred during this period. This can be explained by the fact that changes in long-term interest rates, rather than short-term federal funds rates, are the ones that tend to affect property values. In this case, unexpected shifts in long-term interest rates resulted in swift adjustments in property prices.
Since home buyers crowded the housing market to beat the anticipated hikes in mortgage rates, making it one of the most competitive quarters since the start of the pandemic. List prices typically decline as mortgage rates rise because the overall cost of owning a home increases. The paradox is that rather than changes in the short-term federal funds rate, property values respond to unexpected changes in long-term interest rates. This explains why variations in mortgage rates in response to Fed policy shifts are "essential" to swift adjustments in property prices. Existing-home sales reversed a 12-month decline in February, registering the largest monthly percentage increase since July 2020, according to the National Association of Realtors. This is a sign that buyers have started entering the market again.
If analysts are accurate in their prediction that the Fed will start lowering interest rates in the second half of this year then purchasing RDFN at current rates could be a stellar opportunity. The 6% annualized inflation rate for February, which was released on March 14th, was the lowest level since September 2021. Although it is still far higher than the Federal Reserve's 2% target rate, the decreasing trend is unmistakable.
Recent Insider Activity Suggests Good Things To Come
Recently, Redfin's CEO Glenn Kelman bought 35,335 shares of RDFN stock for a total cost of $304,587.70. The Securities & Exchange Commission issued a document detailing the acquisition. After the purchase, Kelman directly owns 1,216,837 shares, worth $10,489,134.94. In addition, director James Slavet also purchased 6,667 shares on February 1st for $49,802.49, increasing his ownership to 235,881 shares worth $1,762,031.07. This insider buying activity is a bullish indicator for RDFN because it shows that people within the company believe in its future prospects and are willing to invest their own money into it. When insiders buy shares, it demonstrates their confidence in the company's direction and financial performance.
According to the latest data, major institutional holders own 82.05% of RDFN shares, indicating a high level of confidence in the company's future prospects. Bares Capital Management Inc is the top institutional holder with 19,883,921 shares, followed by The Vanguard Group Inc. with 14,318,508 shares, and Baillie Gifford and Company with 9,757,578 shares. The top mutual fund holders are led by Vanguard U.S. Growth Fund with 4,448,817 shares, followed by Vanguard Specialized-Real Estate Index Fund with 4,018,857 shares and Vanguard Total Stock Market Index Fund with 2,929,281 shares.
The difference between the percentage of shares held by institutions and the percentage of float held by institutions is based on the difference in the total number of shares outstanding and the number of shares available for public trading. The percentage of shares held by institutions refers to the total percentage of a company's outstanding shares that are owned by institutional investors, such as mutual funds, pension funds, and hedge funds. These shares may be held for various reasons, such as investment purposes, long-term holdings, or strategic interests.
On the other hand, the percentage of float held by institutions refers to the percentage of a company's shares that are available for public trading and are held by institutional investors. The float is the number of outstanding shares that are not held by insiders, such as officers and directors of the company, and are available for trading on public exchanges.
The difference between these two measures is that the percentage of shares held by institutions may include shares that are not available for public trading, while the percentage of float held by institutions only includes shares that are available for trading on public exchanges. Therefore, the percentage of float held by institutions may be a more relevant measure of institutional ownership for investors who are looking to trade in the public market. Investors should monitor institutional ownership as a key metric in their investment decisions, as it can indicate the level of confidence that large, sophisticated investors have in a company's prospects. Higher institutional ownership may suggest a higher level of confidence in the company's future prospects and may be a positive signal for investors.
That being said, not everyone is quite so bullish. The sentiment of financial analysts toward RDFN is mixed. Currently, the consensus EPS recommendation rating is 3.3, indicating a strong buy sentiment. However, some financial institutions have recently downgraded RDFN, with Oppenheimer and Piper Sandler both downgrading the stock to underperform and underweight, respectively.
While recognizing there are valid critics of our bullish assessment, these are offset by considerations this stock can offer potential investors.
1. Insider buying: When insiders of a company purchase shares, it indicates a high level of confidence in the company's future prospects. In the case of Redfin, the recent insider buying by CEO Glenn Kelman and director James Slavet is a positive signal for potential investors. By purchasing a substantial number of shares in the company, the insiders are demonstrating a strong commitment to its success and aligning their interests with those of other shareholders. This alignment can be seen as an indication of management's focus on creating long-term value for the company's stakeholders, as the insiders have put their own money on the line.
Such bullish insider behavior can draw in other investors who may interpret it as an indication of promising future development potential. As a result, insider purchases can have a big impact on how the stock price of a company moves since they boost investor confidence about the future of a company like RFDN.
2. Strong fundamentals: Redfin has established itself as a key player in the fiercely competitive real estate industry by leveraging its innovative technology platform, which has helped the company gain significant market share. The company's brokering division comprises over 2,000 lead agents, enabling it to cover 98% of the geographically defined United States real estate market.
Redfin's unique pricing strategy, which charges listing costs of just 1%, has proven successful in saving sellers more than $1 billion to date, compared to the industry standard of 2.5%. These strong fundamentals have contributed to the company's success and positioned it well for future growth.
3. Undervalued opportunity: The current price-to-sales (P/S) ratio of a company is a significant indicator of its stock price relative to its revenue. A P/S ratio below 1 indicates that the stock is currently undervalued relative to its sales, making it a potential bargain for investors seeking to enter the market. Currently, RDFN’s current P/S ratio is not only below 1 but also the lowest it has been since its initial public offering.
Additionally, it is significantly lower than its highest P/S ratio of 7.7. This presents an opportunity for investors to purchase the stock at a highly discounted price, potentially leading to a bullish trend in the stock's future performance.
A low P/S ratio coupled with positive market indicators can signal a bullish trend for a company's stock, as it may attract investors who see it as an undervalued opportunity. The current P/S ratio RDFN presents a compelling opportunity for investors looking to purchase the stock at a discounted price, which can be a good bullish indicator for its future performance.
There is no discounting the fact that the Fed’s current battle to tackle inflation won't be a significant risk factor. The strong connection between mortgage rates and the housing market, with changes in interest rates having a significant impact on the buying and selling of homes, remains one of the primary factors when deciding on a stock like RDFN. However, as a real estate company that competes with both traditional brokerages and technology-driven companies for a share in the real estate industry, Redfin's strategy focused on its technology-driven approach, exceptional customer service, and competitive pricing making it optimal for managing current market instabilities and a strong contender for being a leader when the macroeconomic storm subsides. In fact, a recent Redfin report indicates some interesting trends. People aren’t moving across town but they are moving across the country, particularly to the sunshine states.
RDFN Finds High Mortgage Rates Have Little Effect on Cross-Country Movers
Redfin recently released a report indicating a decline in the number of home searchers looking to relocate within their current metro area. According to the report, in February 2022, there was a 14.4% drop in Redfin.com home searchers looking to relocate within their current metro area, while the number of home searchers looking to relocate to a new metro fell by 3.6% year over year. The report suggests that rising mortgage rates have made purchasing a home more expensive, leading to a decrease in the number of home searchers looking to relocate within their current metro area. However, elevated mortgage rates have not had a significant impact on relocating homebuyers because they are typically moving to more affordable areas.
Moreover, people moving from one part of the country to another may have a non-negotiable reason for their move, such as a higher-paying job or to be closer to family, or perhaps the ability to work remotely. Such homebuyers are less likely to be deterred by high mortgage rates than those simply considering a different house within the same town. The report also showed that 25.1% of house hunters nationwide looked to relocate to a new metro in February, which is a record high, up from 22.9% a year earlier and roughly 18% before the pandemic. Relocators made up a bigger portion of homebuyers than ever before due to elevated mortgage rates, still-high home prices, inflation, and economic uncertainty.
Popular Sun Belt destinations like Miami, Phoenix, Las Vegas, and Tampa were the most popular destinations for house hunters looking to move to a different metro in February. Relatively affordable Sun Belt metros perennially top the list of places people are looking to move to, mainly due to their comparatively cheap housing and warm weather.
Latest Redfin Homebuyer Demand Index Insights
After you read this article, you will want to analyze the multitude of charts from the Redfin Homebuyer Demand Index published on March 31 by analyst Dana Anderson, This latest report hit its highest level since September 2022, up 6% from the previous week. Moreover, mortgage purchase applications are up 2% from the previous week, marking the fourth straight week of increases, while touring activity is up about 20% from the start of the year. These trends indicate that the US housing market is regaining momentum, and there is likely to be a surge in demand for homes in the coming months.
The data also reveals that new listings of homes for sale have declined by about 21% to 22% on a year-over-year basis for the last month, and pending home sales have fallen in all 50 of the most populous US metros. However, active listings were up 13.9% from a year earlier, the smallest increase in more than four months. These trends suggest that the market may be facing some short-term supply constraints, which could further boost the prices of homes.
Despite the supply constraints, the median asking price of newly listed homes was up 1.4% year over year, indicating a sustained demand for homes. Moreover, the median home sale price of $360,500 is down 1.8% from a year earlier, the sixth consecutive week of annual price declines. This trend may be an opportunity for buyers to purchase homes at a lower price point, which is expected to drive up demand in the coming months. As previously noted, RDFN's focus on providing technology-driven real estate services is well-positioned to tap into the evolving needs of homebuyers and sellers.
Conclusion
Redfin's financial performance is strongly correlated with the state of the housing market as a whole, which is impacted by a variety of macroeconomic factors. Nonetheless, despite these difficulties, the AI-powered stock prediction is positive on RDFN shares and indicates that the current price is a good opportunity to buy before prices start to rise. Investors looking for exposure to the U.S. residential real estate industry may find it beneficial to invest in this cutting-edge technology-driven organization. Shares of RDFN have been trading at a discount to their historical highs, and recent insider purchases are an optimistic indicator for the future.
Recent changes in the American housing market, such as a decline in mortgage applications and an increase in relocation activity, may also help the company's possibilities for expansion. The recent decline in mortgage applications and rising mortgage rates may discourage homebuyers from relocating within their current metro areas. However, the rising trend of relocation to more affordable areas, particularly in the Sun Belt regions, can counter that with significant opportunities for RDFN to expand its operations and gain market share. With more people working remotely, this has become a viable option for many more people motivated by either a lower cost of living or perhaps warmer weather year-round or even perhaps both.
The significant stakes taken by the CEO and director of the firm recent purchasing indicates that management thinks the stock is undervalued and has room for long-term growth. Additionally, the business has been able to increase its market share in the very competitive real estate sector because of its cutting-edge technological platform. The majority of the US real estate market is covered by more than 2,000 lead agents, and RDFN has helped save sellers money by charging listing fees that are less than half the industry average. The company's price-to-sales ratio is currently less than 1, offering an alluring opportunity for investors to purchase the stock at a reduced price, making this a worthy contender for long-term investors at a bargain price.
While no investment is without risk, for the many reasons mentioned above, RDFN offers a compelling value proposition for value investors looking for undervalued stocks. All forms of investing, stock predictions, and investment plans have the possibility of losing part or perhaps all of your initial investment. Remember that past outcomes are not always indicative of future ones. You should always get advice from a licensed financial counselor before implementing any financial plans.
Enhanced Market Intelligence
Finding market opportunities is made easier by using our AI system. It doesn't tell you what to do. It tells you where to look. Our skilled team of analysts carefully verifies the AI outputs and enhances this market research with a human touch, providing our subscribers with enhanced market intelligence. If you would like the AI advantage working for you, then you should subscribe today!
Life is better when you can be bullish.
Sources:
1. NBC News, "Senate holds its first hearing into SVB and Signature Bank failures" (2023)
2. Statista, "Monthly 12-month inflation rate in the United States from February 2020 to February 2023" (2023)
3. Freddie Mac, "Mortgage Rates Decrease for the Third Consecutive Week" (2023)
4. National Home of Realtors, "Existing-Home Sales Surged 14.5% in February, Ending 12-Month Streak of Declines" (2023)
5. SEC Archives, "UNITED STATES SECURITIES AND EXCHANGE COMMISSION
6. SEC Archives, "UNITED STATES SECURITIES AND EXCHANGE COMMISSION
7. Yahoo Finance, "Major Holders Breakdown" (2023)
8. Redfin Investor Relations, "Redfin Reports Cross-Country Movers Largely Undeterred By High Mortgage Rates" (2023)
9. Redfin Investor Relations, "Housing Market Update: Early-Stage Homebuying Demand Hits Highest Level Since May" (2023)
Comments