Redfin Corp (RDFN) GRAB AND GO 7-PACK - Left Brain Investment Research
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“Seeking Stocks
that can Double
in 2-3 Years”
GRAB AND GO 7-PACK
Redfin Corp (RDFN)
An investment in Redfin is a play on the US residential real estate market. RDFN estimates that
nearly $82 billion were paid in real estate commissions in 2019. It is rapidly gaining market share,
driven by its low fees and convenient online model. The housing market has been strong till now
but we remain cognizant of the fact that second surge of COVID-19 cases and double-digit
unemployment could cause challenges.
Recommendation: Yellow Light
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8/22/2020 (These are hypothetical examples, not to be shown or distributed without permission of LBIR.)
Redfin Corp(RDFN)
RDFN Performance vs S&P 500
RDFN (in green) vs. S&P 500
50.00 3,500
45.00 3,300
40.00 3,100
2,900
35.00
2,700
30.00
Grab-and-Go 25.00
2,500
2,300
7-PACK
20.00
2,100
15.00 1,900
10.00 1,700
5.00 1,500
RDFN S&P 500
Share Price (as of 08/21/20): $47.44
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8/22/2020 (These are hypothetical examples, not to be shown or distributed without permission of LBIR.) 1
Redfin Corp (RDFN)
Company Overview CEO/Founder
Redfin Corp is an online real estate brokerage Glenn Kelman is the CEO of the company; he
company. has been serving in this position since
September 2005.
Besides brokerage, it also offers mortgage
origination, title & settlement services. He has extensive experience in engineering,
marketing, product management and business
Grab-and-Go It also buys home directly from homeowners development.
7-PACK via RedfinNow service.
Prior to joining Redfin, he was a co-founder of
Low commission – Just 1% compared to 2.5 to Plumtree Software.
3% industry average.
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8/22/2020 (These are hypothetical examples, not to be shown or distributed without permission of LBIR.) 2Redfin Corp (RDFN)
Total Addressable Market (TAM) Competitive Environment
Annual home sales in the US - $1.9 trillion in Highly fragmented.
2019.
86,000 brokerages in the US.
Brokerage Commission was $82 billion in 2019
Primary competitors include
Grab-and-Go Additional Opportunity Zillow Group (ZG)
Mortgage Origination ($44 billion) Re/Max (RMAX)
7-PACK
Title & Escrow ($35 billion) Realogy Holdings (RLGY)
Of these, ZG is the largest and the nearest
pure-play comp.
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8/22/2020 (These are hypothetical examples, not to be shown or distributed without permission of LBIR.) 3Redfin Corp (RDFN)
Business Catalysts Headwinds/Tailwinds
Low Commission – Continues to drive market Tailwinds
share gains Low interest rate environment to support
housing demand.
Additional Growth Drivers
Mortgage, title services and RedfinNow. Primary headwinds
Grab-and-Go Low inventory levels
Integration of all service under one umbrella
7-PACK uncertainties around second order of
COVID impacts
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8/22/2020 (These are hypothetical examples, not to be shown or distributed without permission of LBIR.) 4Redfin Corp (RDFN)
Valuation
1 2
Estimates of Revenue Growth EV/Sales
EV/TTM Sales stands at 5.2x; P/TTM Sales
Revenue is expected to increase by ~56% is 5.1x.
for FY21
TTM revenue grew ~53.2% on a yoy basis
Grab-and-Go
7-PACK
Free Cash Flow Operating Income
TTM operating loss at ~$61 million.
TTM FCF at ~$33 million
TTM EBITDA at negative ~$46 million.
FCF Margin was 3.7%
3 4
Left Brain Investment Research, LLC all rights reserved. Not to be used or reprinted without permission.
8/22/2020 (These are hypothetical examples, not to be shown or distributed without permission of LBIR.) 5What sets RDFN apart?
Low Commission rate #1 brokerage website
4x more traffic compared
Superior technology platform to its nearest competitor.
>90% listing appear
within 5 min of their Quality of High Net Promoter Score.
Special/Unique debut on MLS Product/
Characteristics
Service
Grab-and-Go One-stop shop
7-PACK brokerage, mortgage,
title and other services.
Left Brain Investment Research, LLC all rights reserved. Not to be used or reprinted without permission.
8/22/2020 (These are hypothetical examples, not to be shown or distributed without permission of LBIR.) 6Why we rate RDFN a
“YELLOW LIGHT”
What we don’t like…
What we like…
Lack of profitability
One of the lowest commission rate in
the industry
Large market - $82B in 2019 High competition with relatively low barriers to
estimated US real estate entry
commissions
High revenue growth – CAGR of
Grab-and-Go 43% during 2015-19. Expensive valuation
7-PACK
Business Rating: (5) Security Rating: (3)
• Internet-based real estate brokerage • Stock up 300% from March lows; Trading at 5.1x TTM sales.
• One stop shop for all real estate needs • Risk-Reward balanced at these valuations. We assign it a
• Low commission leads to customer savings Yellow Light.
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8/22/2020 (These are hypothetical examples, not to be shown or distributed without permission of LBIR.) 7You can also read
