Here's Why I Still Own Redfin
Redfin (NASDAQ: RDFN) peaked at more than 14 times its current stock price in 2021, and it isn't hard to see why investor sentiment has soured. At that time, the U.S. real estate market was on fire. Home prices had started to rise rapidly but interest rates were still near all-time lows, keeping market activity elevated. The stock market was soaring and low-cost capital was abundant. Plus, investors had high hopes that the Redfin Now iBuying business was going to be a massive growth driver.
Fast-forward to the present time, and things look very different. Real estate prices have mostly stabilized, but mortgage rates are roughly double what they were at Redfin's peak, which has caused existing home inventories and buyer activity to grind to a near-halt in many markets. The company has been losing money at an alarming pace, and decided to shut down Redfin Now, which was responsible for much of it.
Plus, Redfin went on somewhat of an acquisition spree, acquiring RentPath out of bankruptcy for $608 million and mortgage lender Bay Equity Home Loans for about $138 million. To put these numbers in perspective, these acquisition prices are roughly equal to the company's entire current market cap. In retrospect, it's tough to justify these, especially with the mortgage market operating at a fraction of the volume of a couple years ago.
Source Fool.com
