Why is REA Group (ASX: REA) testing 18-month Lows?
REA Group (REA) — Falls after Bell Potter Turns Seller with a 37% Price Target Cut
Previous bullish Bell Potter analyst Michael Ardrey has flipped from buy to sell on REA Group Limited (REA), slashing his price target 37% to $137.00 as a softening listings outlook and post-Budget rising tax headwinds constrict the company’s yield growth story.
Ardrey argues that declining property demand will hit volumes hard enough to more than offset REA’s pricing power and flags a telling historical pattern.
- REA has a track record of EPS declines when home prices fall.
From a valuation perspective he also sees REA as expensive relative to ASX classifieds peers even after today’s sell-off. The headwinds are building for REA with rising interest rates and the federal government’s taxation changes combining to pressure the very property market that underpins REA’s listings revenue.
MM’s View: A 37% price target cut from a former bull shouldn’t be ignored although we do believe he’s fallen on his sword a bit late, it’s a case of “better late than never”.
- REA Group (REA) remains in the too hard basket for MM until further notice – it’s been there all year!
