Redfin inventory plunges after Oppenheimer downgrades on ‘basically flawed’ mannequin

Redfin (NASDAQ:RDFN) inventory sank as a lot as 17% to a brand new all-time low in Monday afternoon buying and selling after Oppenheimer analyst Jason Helfstein downgraded shares of the residential actual property expertise brokerage to Underperform from Carry out, citing its “basically flawed” core enterprise.

With housing demand drying up in opposition to a backdrop of mortgage charges which have soared to two-decade highs, RDFN inventory dropped 93.1% previously yr. In search of Alpha’s Quant system had warned traders again in February that RDFN was at excessive threat of performing badly because of inferior profitability and decelerating momentum.

“We consider that Redfin’s enterprise is basically flawed, as the corporate continues to make use of a fixed-cost mannequin for brokers. This prevents the corporate from optimizing margins when the housing markets decline and limits share beneficial properties when markets rebound,” Helfstein wrote in a word to purchasers.

The housing cooldown already took its toll on Redfin (RDFN) after the corporate launched its worse-than-expected second-quarter outcomes. Its web loss widened to $78.1M from -$27.9M in Q2 2021, and working bills climbed to $192.66M from $156.45M in Q2 2021.

Helfstein’s Underperform ranking converges with the Quant’s Robust Promote ranking however disagrees with the common Wall Road analyst ranking of Maintain.

SA contributor Gary Alexander believes Redfin’s enterprise mannequin is poorly geared up for a slowdown in dwelling gross sales.