Redfin stock tumbles as tech-powered brokerage surpasses Wall Street expectations

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Redfin CEO Glenn Kelman at the 2018 GeekWire Summit. (Photo by Dan DeLong for GeekWire)

Redfin beat Wall Street expectations for revenue and profits in the third quarter, but its stock is falling in after-hours trading.

The tech-powered real estate brokerage reported net profits of $3.5 million — $0.04 per share — on $140.3 million in revenue, a 28 percent increase over a year ago. Analysts surveyed in advance expected Redfin to post earnings of $0.02 per share on $139.27 million in revenue.

In a statement, Redfin CEO Glenn Kelman lauded growth in the company’s market share of home sales. Redfin had a 0.85 percent market share at the end of the third quarter, which up from 0.71 percent a year ago.

“Redfin’s steady third-quarter market share gains reflect the enduring appeal of our low prices and personal service,” said Redfin CEO Glenn Kelman. “A housing-market correction always makes it harder to grow revenues, but our ability to do so in even challenging markets speaks to our business’s fundamental strength. We believe that our improved third-quarter growth in traffic, as well as increased engagement levels between agents and customers, sets us up for continued share growth. Our investments in software to make our agents more efficient — and to integrate all the paperwork and processes for buying and selling a home, getting a mortgage and transferring the title — should let us compete at a price and a scale few other brokerages can.”

Redfin’s Properties segment, which includes the direct home buying and selling operation Redfin Now, more than tripled over a year ago. In the third quarter, it brought in $11.3 million versus $3.3 million a year ago. In August, Redfin took the “experimental” tag off Redfin Now, making the service a key part of its business moving forward.

The stock drop — shares dropped as much as percent in after hours trading and are now down about 5 percent — could stem from a fourth quarter outlook that came in below what analysts expected. Redfin projected a net loss between $16.6 million and $18.7 million on revenue between $115.1 million and $118.3. That figure would represent 20 to 24 percent annual growth, but it comes in below expectations of $121.3 million.

Redfin stock recently fell below its $15 IPO for the first time since the company went public in 2017. The stock has lost about a third of its value since early August, with a huge dropping coming after the company’s last earnings report when Kelman warned of a slowing housing market and lowered the Redfin’s targets for revenue and profits this quarter.

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