The REA Group Limited (ASX: REA) share price is testing the heights again today as the company closes in on its all time high of $119.
Trading at around $118.65 at the time of writing, REA Group shares are once again surging to levels we saw only 7 days ago.
The share price fell around 4% on 12 August, following the release of its financial results for FY20. But only a week later, the multinational digital advertising giant is gaining back all lost ground to test previous highs.
With such strength in the REA Group share price, could this present a buying opportunity?
About REA Group
REA Group is a multinational digital advertising business specialising in real estate.
The company runs realestate.com.au, realcommercial.com.au and flatmates.com.au. Between them, these three websites operate Australia’s top residential, commercial and share property advertising businesses.
In addition to these well-known brands, the company owns an Australian ‘co-working’ space website called spacely.com.au.
Overseas, Asian operations in the property space are extensive and stretch across Malaysia, Hong Kong, Indonesia, Singapore, China and Thailand.
Not only does the REA Group own and operate this large portfolio, but it also owns significant share portfolios in related companies in the United States and India.
In 2019, REA Group assumed 100% ownership Australian mortgage broker Smartline Personal Mortgage Advisors.
The group had acquired more than 80% of the mortgage broker back in 2017, so a full takeover was always on the cards. This is a strategic acquisition for the group and now allows them to offer even more services to their clients. Its makes sense that a customer looking to buy a house online will likely also need a mortgage broker.
Recent Results
Some high level points from the recent reporting are:
- Revenue declined by 6% to $820 million
- Net profit down 9% to $269 million.
- Media revenue down 19%
- Financial services revenue down 15%
Considering the COVID-19 pandemic has drastically restricted the ability to operate in the real estate space, these results really aren’t too bad in the scheme of things.
REA Group share price performance
The company’s share price took a serious hit in March this year, falling almost 50%. The COVID-19 pandemic has presented a real challenge for the group.
However a strong recovery has occurred since then. From a low price in March of around $62, the REA Group share price has rocketed back up to challenge previous highs, trading past $118 today.
This represents a staggering 90% price increase in less than half a year.
For investors interested in long-term performance, the REA Group share price is up more than 7,700% since listing in 1999. A healthy return by any measure.
Foolish Takeaway
REA Group is a digital advertising giant. The company has been on the market for more than 20 years and is still going strong. The recent acquisition of a mortgage broking company is a strategic play and creates a situation where it has multiple revenue streams from a single customer.
If the group can push past its all time high price of $119, we may see the company reach much higher levels in the near future. Considering it has achieved this strong recovery while the pandemic still threatens the economy, I have no doubt REA Group will be stronger than ever on the other side of a vaccine.
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Motley Fool contributor glennleese has no position in any of the stocks mentioned. The Motley Fool Australia has recommended REA Group Limited. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.
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