REA share price drops as key first quarter metrics decline

As Australia’s property market looks to be staging a comeback, we examine REA Group’s first quarter FY20 results.

REA share price: Q1 results in focus

When the REA Group reported that a number of its key financial metrics had declined during Q1 of the 2020 fiscal year, it was of little surprise that its share price fell when the market opened today.

All up, REA Group reported that its revenue (after broker commissions) had declined 9% on a year-over year basis; that earnings (EBITDA) ‘excluding share of losses associates and joint ventures’ were also down 14% year-over-year and that free cash flow had dropped 20%, to hit 41.8 million in Q1.

In step with this at least, the Group’s operating expenses also fell by 2% during Q1, declining from $88.8 million to $87.4 million.

In response, the REA share price dropped as much as 5% not long after the open – before rebounding slightly as the session progressed. Investors should however frame this modest decline in the broader context: that is, the REA share price has risen an impressive 39% year-to-date, almost double that of the ASX 200 index.

Outlook and catalysts unpacked

Speaking of these results, Owen Wilson, REA Group’s CEO said:

'Our performance has shown remarkable resilience given we have been tested by unprecedented market conditions. Pleasingly, we are seeing the signs of a gradual market recovery.'

Mr Wilson, further commented that:

'We know the buyers are back and it's only a matter of time before the sellers follow.'

Mr Wilson looks to be onto something, and his statements are indeed supported by CoreLogic’s recent data on Australia’s dwelling values. For example, as of October 31 and on a national level, though dwelling values have declined 2.3% on an annual basis, they have increased 2.9% on a quarterly basis and 1.2% on a monthly basis.

Melbourne and Sydney – maybe Australia’s most competitive and condensed property markets have seen even stronger gains in recent times. On a quarterly basis Sydney dwelling prices have increased a substantial 5.0% and Melbourne dwelling prices have climbed 5.5% – also on a quarterly basis.

On a philosophical level, REA Group is indeed right in saying that Australians are passionate about property. Ultra-low interest rates and Westpac’s recent decision to halve deposit requirements for interest only loans may have also helped.

Yet if CoreLogic’s research is anything to go by, the Australian dream looks to be making a comeback.

A more buoyant property market aside, REA Group, reflecting on the full-year outlook, noted that it expected lower listings in the first half of FY20, 'due to the comparatively favourable listings environment in H1FY19.'

Mind you, REA Group expects a more favourable listing outlook for the second half of the FY20 fiscal year.

It will be interesting then to see how investors react in the interim.

At the time of writing, the REA share price currently trades around the $104.84 mark.


This information has been prepared by IG, a trading name of IG Markets Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. See full non-independent research disclaimer and quarterly summary.

Seize a share opportunity today

Go long or short on thousands of international stocks.

  • Increase your market exposure with leverage
  • Get spreads from just 0.1% on major global shares
  • Trade CFDs straight into order books with direct market access

See opportunity on a stock?

Don’t miss your chance. Try a risk-free trade in your demo account, and find out whether your hunch could have paid off.

  • Log in to your demo
  • Try a risk-free trade
  • See whether your hunch pays off

See opportunity on a stock?

Don’t miss your chance. Upgrade to a live account to take advantage.

  • Trade a wide range of popular global stocks
  • Analyse and deal seamlessly on fast, intuitive charts
  • See and react to breaking news in-platform, when it matters

See opportunity on a stock?

Don’t miss your chance. Log in to take advantage while conditions prevail.

Live prices on most popular markets

  • Forex
  • Shares
  • Indices
Bid
Offer
-
-
-
-
-
-
-
-
-
-
Bid
Offer
Bid
Offer
-
-
China 300
-
-

Prices above are subject to our website terms and agreements. Prices are indicative only. All shares prices are delayed by at least 15 mins.

Plan your trading week

Get the week’s market-moving news sent directly to your inbox every Sunday. The Week Ahead gives you a full calendar of upcoming economic events, as well as commentary from our expert analysts on the key markets to watch.


For more info on how we might use your data, see our privacy notice and access policy and privacy webpage.

You might be interested in…

Find out what charges your trades could incur with our transparent fee structure.

Discover why so many clients choose us, and what makes us a world-leading provider of spread betting and CFDs.

Stay on top of upcoming market-moving events with our customisable economic calendar.

Spread bets and CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 75% of retail investor accounts lose money when trading spread bets and CFDs with this provider. You should consider whether you understand how spread bets and CFDs work, and whether you can afford to take the high risk of losing your money. Spread bets and CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage.