REA slipped -2.8% on Monday, its largest decline in 3 months, as high-value tech stocks struggled at the start of July. Following REA’s strong result in May, we are optimistic about their ability to drive annual price rises over the next three years given their market position, and when combined with more bells and whistles for advertisers to utilise, some of which are driven by the AI, spending more across more features is how they’ll continue to drive earnings, much like Xero (XRO) in the accountancy space. However, while we like REA as a business, and we put our hands up for selling too early, it’s expensive, and after failing on its initial foray at ~$200, from a risk/reward perspective, we would want the stock ~8% lower to buy it.
- We can see REA trading back under $180 over the coming months; hence, we are comfortable on the sidelines for now.
MM is neutral REA short-term
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