The home is the vast majority of people’s largest and most important purchase, and lower interest rates provide a tailwind to affordability and, of course, general sentiment. However, the goalposts have moved for REA over the last fortnight since US property giant CoStar made a $2.7 billion takeover bid for real estate rival Domain (DHG). CoStar Group (CSGP US) is around 50% larger than REA and is set to give the incumbent dominant player a big run for its money. For many years, REA has been competing against a limp competitor, however that would change if CoStar is successful.
Hence, while we like REA as a business, we think this new competitive threat is real, assuming the deal goes ahead for DHG.
- We don’t think the share price is currently factoring in the potential change in their competitive landscape.
MM would only get interested in REA closer to $200
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