Stellar earnings beat but REA (ASX:REA) share price dips… Do brokers say buy?

The REA Group Limited (ASX: REA) share price has edged lower despite the company’s impressive half-year results released earlier today.

In its report, the real estate classifieds company recognised a 37% year-on-year gain in revenue and a similar jump in net profit and earnings per share (EPS).

Not only that, but REA’s board declared a juicy 75 cents per share interim dividend for shareholders to bite into – a spike of 27% on the last payment.

The REA share price ended today’s session at $142.83, down 0.65% after a wild ride today.

Earlier this morning, the REA share price soared by 5.5% to $151.99. In intraday trading though, it dropped as low as $139.83, representing a 2.9% decline on yesterday’s close.

With such a strong business performance clearly on display, and a fluctuating share price, is REA a buy right now? Let’s see what these experts have to say.

Is REA Group a buy?

According to analysts at investment bank Citi, REA is worth considering for ASX investors.

The broker said REA’s strong performance took the market by surprise, as it beat expectations on both revenue and expenditure.

Of particular note was the circa 25% growth in turnover from financial services. This was alongside the company’s outsized growth in its India operations, both of which impressed the broker.

Even though REA missed Citi’s forecasts on commercial developer revenues by approximately 10%, it reckons this half’s outcome is sure to result in a suite of analyst upgrades on FY22 estimates.

Not only that, but the earnings surprise should bode well for the REA share price, Citi says. This is especially because market pundits were baking in lower results from the company.

As such, analysts at Citi recommend REA as a buy and price the company at $144.04 per share.

Analysts at Citi weren’t the only ones chiming in with an update on REA today.

Andrew McLeod of Morgan Stanley also reaffirmed their overweight/attractive rating for REA shares, assigning a $182.50 price target in the process.

However, the team at Barrenjoey Markets were less constructive, leaving a neutral rating on REA. They have a $175 per share valuation. That’s substantially lower than other price targets, but curiously, higher than the bullish Citi’s valuation.

According to a list of analysts provided by Bloomberg Intelligence, more than 56% of coverage has REA as a buy. Just 1 broker has it as a sell.

The consensus price target on the company is $165.54 (ex-dividend), suggesting a potential 16% upside.

REA share price snapshot

The REA share price has collapsed by 17% since 1 January amid a broad market sell-off in classifieds shares.

However, the trend has been in situ for some time, with classifieds shares tumbling over the previous quarter to trade at around 52-week lows. Other classifieds shares caught up in the sell-off include Carsales.com Ltd (ASX: CAR) and Seek Limited (ASX: SEK), which are down 13% and 17% respectively.

The post Stellar earnings beat but REA (ASX:REA) share price dips… Do brokers say buy? appeared first on The Motley Fool Australia.

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Citigroup is an advertising partner of The Ascent, a Motley Fool company. Motley Fool contributor Zach Bristow has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. 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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