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Shares of Redfin Corp. rose Thursday, after the analyst who called the top two months ago said it was time to stop selling.
Analyst Tom White at D.A. Davidson raised his rating to neutral from sell, citing improved valuation and some signs of improving listing share.
The stock
RDFN,
rose 1.1% in afternoon trading after it bounced 1.5% on Wednesday off of Tuesday’s 5 1/2-month closing low. The gains come even after data showing pending home sales in August dropped 7.1% from the previous month, much worse than Wall Street expectations of a 1% decline.
“As for valuation, the 55% decline in [Redfin] shares since July 12th (compared with a 5% decline for the Nasdaq over the same period) has yielded a more balanced risk/reward for the stock in our view,” White wrote in a note to clients.
The reason White picked July 12th as a reference point, rather than that 15-month of $17.01 the stock closed at on July 13, was that White had recommended on July 12th that investors sell the stock, because it had rallied too much.
Besides just valuation, White said Thursday his research shows that Redfin has managed to “steadily eek out” some market-share gains in recent months.
“Our analysis indicates that [Redin’s] share of all U.S. for-sale home listings is currently 0.29% (3,483 RDFN listings vs. 1.18M total U.S. for-sale home listings), up from the 0.26% we last reported in early July and the 0.24% we tracked in late May,” White wrote.
It’s not much, but at least it’s not falling. And it does follow Redfin Chief Executive Glenn Kelman’s call made in August that the housing market hit “rock bottom” in the summer.
White’s upgrade comes two days after Gordon Haskett’s Robert Mollins raised his rating on Redfin’s stock to hold, after being at underperform since July 19, citing the “material underperformance” relative to the S&P 500 index.
While Mollins said he remains “cautious on the housing market overall,” he now sees a “more balanced risk/reward” dynamic for the stock after its recent selloff.
Of the 16 analysts surveyed by FactSet who cover Redfin, there are only two bears left while the other 14 are neutral.
Redfin’s stock has tumbled 49.1% over the past three months, but was still up 66.4% year to date, while the Nasdaq Composite
COMP
has gained 26.2% this year and the S&P 500
SPX
has advanced 12.1%.
