The REA Group Limited (ASX: REA) share price has continued its positive run on Wednesday.
In fact, at one stage the property listings company’s shares were up almost 3% to a new record high of $149.47.
When the REA Group share price reached that level, it meant it was up an impressive 42% since the start of the year.
Why is the REA Group share price at a record high?
There have been a couple of catalysts for the outperformance of the REA Group share price in 2020.
One of those was the company’s solid performance during the pandemic. Despite the disruption caused by COVID-19, REA Group delivered a relatively robust FY 2020 result and has built on this in FY 2021.
For example, in FY 2020, REA Group experienced a sizeable 12% reduction in national listings. However, it 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.
Pleasingly, national residential listings recovered to almost pre-COVID levels during the first quarter of FY 2021 and were down just 2% on the prior corresponding period.
This improvement, combined with a meaningful reduction in its cost base, led to REA Group delivering an 8% increase in first quarter EBITDA compared to the corresponding period to $123.8 million.
And with listing volumes improving further early in the second quarter and many experts tipping a strong rise in house prices next year, things are looking positive for REA Group in FY 2021.
Bullish brokers.
Another catalyst for the strong performance of the REA Group share price was a recent broker note out of Morgan Stanley.
Its analysts believe the company is well-placed for growth due to improving property listing volumes, larger than normal price increases next year, and its flat costs
This led to Morgan Stanley putting an overweight rating and $150.00 price target on its shares last month.
However, with the REA Group share price now trading within touching distance of this price target, the potential upside from here could be limited.
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Returns as of 6th October 2020
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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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