The REA Group Limited (ASX: REA) share price has been a very strong performer in 2020.
Since the start of the year, the property listings company’s shares have stormed a sizeable 43% higher.
Why is the REA Group share price storming higher in 2020?
Investors have been fighting to get hold of REA Group’s shares in 2020 due to its resilient performance in FY 2020, its solid start to the new financial year, and its positive long term outlook.
In respect to FY 2020, REA Group was faced with a 12% reduction in national listings because of the pandemic. However, thanks to the resilience of its business, the company only reported a 6% decline in revenue to $820.3 million and a 5% decline in earnings before interest, tax, depreciation and amortisation (EBITDA) to $492.1 million.
Positively, listing volumes have been improving and were down only 2% just the first quarter of FY 2021 compared to the prior corresponding period.
Combined with a sizeable reduction in its operating expenses, this led to REA Group’s EBITDA returning to growth during the quarter. The company delivered an 8% increase in EBITDA over the prior corresponding period to $123.8 million.
And with listings volumes continuing to recover early in the second quarter, REA Group appears well-placed to deliver a solid half year result next year.
What else gave REA Group’s shares a boost?
In addition to its strong operating performance, investors responded positively to a broker note out of Morgan Stanley.
Its analysts are particularly positive on the company’s prospects due to their belief that its earnings growth will be strong in the coming years due to improving property listing volumes, larger than normal price increases next year, and relatively flat costs.
The led to Morgan Stanley putting an overweight rating and $150.00 price target on its shares. Though, it is worth noting that its shares have now surpassed this and closed at $150.23 on Tuesday.
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Returns as of 6th October 2020
More reading
- 3 of the best ASX shares to buy in January
- The most crazy ASX chart of 2020
- REA Group (ASX:REA) share price on watch after acquisition update
- Why the REA Group (ASX:REA) share price just hit a new record high
- 3 ASX growth shares to add to your portfolio in 2021
Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia has recommended REA Group Limited. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.
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