Deep Dive: Redfin
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What do they do? Redfin is an internet-enabled real estate brokerage. It combines mortgage, brokerage, title, and instant buying (iBuying) solutions onto one platform.
History? It was founded in 2004 by David Eraker, Michael Dougherty, and David Selinger in Seattle. They went public in 2017.
Industry? Redfin estimates it has around 1% of the U.S. market at the moment. There are a ton of legacy competitors including Windermere, Coldwell Banker, but their internet brethren include Zillow and Opendoor. Amazon was rumored to be entering the iBuying market but that hasn’t come to fruition.
Management? Glen Kelman has been the CEO sine 2005. He owns about 1.5% of the shares
Valuation? (As of recording) P/S of 8.86, P/GP of 33.8, P/OCF of 128.
Earnings? $886M in sales, up 13.6% YoY. 42M monthly average visitors, up 28% YoY.
Balance Sheet? $925M in cash, but up to $600M in convertible notes (they are already in the money). They have a credit facility to fund some of the iBuying purchases.
Potential Competitive Advantages? We had scale, better business model than Opendoor or Zillow, and having the agents on as employees not contractors.
Potential Future Growth Opportunities? Expanding to new markets, acquisition of RentPath.
Highlights? The CEO seems good, and their model looks like the best path forward for the real estate industry.
Lowlights? The overall strength of the real estate market can impact their business. Not something in their control.
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Disclosure: The authors and podcast guests are not financial advisors. Brett Schafer and Ryan Henderson are portfolio managers at Arch Capital. Clients of Arch Capital may hold securities discussed on this podcast.