What occurred
Shares of Redfin (NASDAQ: RDFN) soared 30% this previous week, in accordance with information from S&P Global Market Intelligence, after the actual property companies supplier introduced plans to shut its home-flipping operations.
So what
Redfin’s third-quarter outcomes launched on Wednesday have been tough. Sharply excessive mortgage charges mixed with stubbornly excessive residence costs led to a steep plunge in residence listings.
Redfin’s gross profit, in flip, plunged 54% yr over yr to $58.1 million. Worse nonetheless, its web loss ballooned to greater than $90 million from $18.9 million within the prior-year quarter.
So why did Redfin’s shares rally following its Q3 report? Traders have been relieved to listen to of the corporate’s plans to shut RedfinNow. The iBuying service basically made Redfin a house flipper, exposing it to doubtlessly large losses throughout what many actual property professionals warn could possibly be an imminent — and extreme — downturn within the housing market.
“Shedding 862 colleagues and mates is heartbreaking,” CEO Glenn Kelman mentioned in a press launch. “However I really feel aid about closing RedfinNow with comparatively low losses.”
Now what
The closure of RedfinNow will enable Redfin to focus its dwindling sources on its core actual property brokerage operations. That’s the place the corporate excels. Its standard web site, low charges, and handy tech-based method have allowed Redfin to steadily achieve market share within the monumental U.S. housing trade.
In flip, the transfer makes Redfin extra prone to survive a possible market crash — and doubtlessly emerge as a stronger and extra worthwhile enterprise.
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Joe Tenebruso has no place in any of the shares talked about. The Motley Idiot has positions in and recommends Redfin. The Motley Idiot recommends the next choices: quick November 2022 $17 calls on Redfin. The Motley Idiot has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the creator and don’t essentially mirror these of Nasdaq, Inc.