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Redfin Analysts Hike Target Prices, Citing Wider Margins

Redfin analysts raised their share-price targets after the real estate broker beat Wall Street's fourth-quarter expectations and posted wider profit margins.
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Redfin  (RDFN) - Get Redfin Corporation Report analysts raised their share-price targets on the real estate broker after it beat Wall Street's fourth-quarter expectations.

Shares of the Seattle company at last check jumped nearly 15% to $29.32. On Thursday they touched a 52-week high of $29.50. That's twice the 52-week low of $14.70, set in early October.

Stephens analyst John Campbell, who reiterated an overweight rating on the stock and raised his price target 10% to $33 from $30, said Redfin is only in the early stages of benefiting from a long investment cycle.

Campbell said many investors had begun questioning Redfin's core business model and asked whether the company would ever turn a profit.

But he now sees a "breakthrough story developing," given the increasingly positive results throughout the year, capped by "stellar" fourth-quarter results.

Redfin posted a loss of $7.8 million, or 8 cents a share, compared with a loss of $12.2 million, or 14 cents, in the year-earlier quarter. Sales rose 88% to $233 million. Analysts polled by FactSet were looking a loss of 12 cents a share on sales of $217 million.

The gross margin for real estate services widened to 32% from 28% a year earlier.

SunTrust analyst Naved Khan raised his price target on Redfin 20% to $30 from $25, saying that the company's rollout of a higher listing fee is a net positive for its revenue growth and margin improvement in its core brokerage business.

Khan, who affirmed his buy rating, noted the company's favorable macro environment and expects its impressive margin gains and increased agent efficiency to continue over the next few quarters.

Wedbush analyst Ygal Arounian said the most important element of the earnings report was “the continued strength in gross margins, and the expectations that the new brokerage commission structure will increase overall revenue,” which should support wider gross margins in 2020.

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Arounian has an outperform rating on Redfin and raised his price target to $31 from $28.

Oppenheimer analyst Jason Helfstein raised his price target to $31 from $24 after Redfin delivered stronger than expected gross-margin performance on increased broker efficiency, aided by a strong real estate market. He maintains an outperform rating.

RBC analyst Mark Mahaney, who also has an outperform rating, raised his price target to
$31 from $26, saying fundamentals were “genuinely positive.”

Mahaney said that the company's real estate services can sustain 20% to 30% revenue growth and that gross margins for that unit can continue to expand.