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The analysts stated that the company’s valuation prompted the upgrade, with Redfin down more than 41% in the last month. However, they stated that RDFN’s agent-employee model is still in question.
“We believe the shares are fairly valued at their current 26% discount to peers on ’24E gross profit. The stock has declined 43% from its 52-week high of $17.68 vs. the 2% decline in the NASDAQ in that period,” they wrote.
“RDFN is now trading at 3.4x ’24E gross profit vs. peers’ average of 4.7x (EXPI, HOUS and COMP),” the analysts added. “We think the discount properly reflects uncertainty around the company’s fixed-cost agent “employee” model” vs. the ‘commission’ model used by the industry at large and the ability to monetize leads through other products (Mortgage, Title, Rentals & Advertising).”
Oppenheimer believes that RDFN positioning agents as full-time employees leaves the company with too many agents in a downturn and not enough to gain market share when the housing market improves.
