Redfin stock plummeted in after-hours trading even though the real estate behemoth beat projections for revenue in its Q4 earnings report, taking in $643.1 million, though the company reported a decrease in its real estate services gross profit and gross margin year-over-year. It also projected a total net loss of $112 million to $115 million in Q1 of 2022 after losing $109.6 million last quarter.
Revenue was up 163% year-over-year, and gross profit was up 35% compared to Q4 2020.
Redfin (RDFN) stock has fallen by nearly 15% following the report’s release.
“Fourth-quarter revenues and net income exceeded our expectations,” said Redfin CEO Glenn Kelman, in a statement. “More importantly, Redfin is broadening its sources of customer value and corporate income, with title, mortgage and iBuying now on track to generate gross profits.”
In the report, Redfin highlighted its market share of 1.15% of existing U.S. home sales by value, an increase of 11 basis points over Q4 2020, as well as the expansion of its iBuying service, RedfinNow, to a total of 30 markets. The company also said it expects net loss from RentPath, a rental website operator, which it acquired last spring for $608 million, to be $19 million next quarter.
Speaking on a conference call following the earnings report, Kelman credited iBuying with driving the revenue success, saying that the company has benefitted “because there are fewer iBuyers bidding against us.”
He added that RedfinNow has had more success in coastal markets and with older homes, where the company has seen higher gross profits with a lower margin.
Kelman also said the company chose to raise its offer prices last December in anticipation of a hot housing market early in 2022, which he called “a decision that seems likely to pay off.”
RentPath, admittedly a liability at this point, will be a priority going forward, Kelman said on the call. Redfin expects to integrate Rentpath on its site next month, he said, and create more efficiencies in the company.
“This will also boost Redfin as a real estate destination…nearly all the real estate sites that Redfin competes with have rental listings,” Kelman said.
Agent retention at Redfin also beat out “all our rivals,” according to Kelman, and he promised that the acquisition of Bay Equity Home Loans last month would create long-term stability and cost savings. He concluded with an overall optimism around the housing market this year despite obvious challenges, saying that Redfin was prepared for rising mortgage rates and inventory challenges, adding that the Redfin website and mobile apps saw a 1% uptick in traffic in Q4 even as rates began to climb.
“With inventory so low, customers need a broker that can get them into homes at a moment’s notice,” he said. “We believe that the inventory crunch will ease in the summer as rates rise, but may not go away in 2022.”
In response to a question on just how much the company’s lower Q1 2022 projections are tied to macroeconomic conditions and nationwide challenges like inventory, Kelman called the guidance “cautious,” saying Redfin’s iBuying is concentrated in the West where inventory is an even bigger challenge than the rest of the country.
“And we just have a ton of demand,” Kelman emphasized. “The question is, how much of it’s going to pull through? And whether some of the people who are trying to make bids right now are actually going to end up saying, ‘Screw it.’”
Jesse Williams is RISMedia’s associate online editor. Email him your real estate news ideas to jwilliams@rismedia.com.
