The REA Group Limited (ASX: REA) share price has risen very strongly by 53% since the ASX started to see the beginning of a market rebound on 23 March.
In comparison, the S&P/ASX 200 Index (ASX: XJO) has only risen by 19% during that time.
Has the buying opportunity passed for investors wishing to take a stake in Australia's largest online real estate portal?
Solid third-quarter results
The market reacted very positively to REA Group's third-quarter results for FY 2020. This was released to the market last Friday morning, with a very strong 7.7% share price rise seen on the day.
Despite the very tough trading conditions caused by the coronavirus crisis, REA Group still managed to deliver a 1% increase in revenue to $199.8 million and an 8% lift in earnings before interest, tax, depreciation and amortisation (EBITDA). While national residential listings declined 7% for the quarter, they were actually up in Melbourne by 6% and in Sydney by 5%.
Considering the devastating impact that the coronavirus crisis has had on our property market, with property open for inspections and auctions virtually coming to a halt, I think that this was actually quite a strong result. So I am not surprised that the market reacted so favourably.
Property inspections and on-site auctions begin to reopen
Already there are signs of the beginning of a residential property market recovery, and investors appear to be encouraged by the release of the Federal Government's 3-step plan to reopen Australia last Friday. This plan aims to see the majority of Australian businesses re-opened by the end of July.
As part of this plan, NSW agents and vendors began traditional property inspections and on-site auctions last weekend after a 6-week limited shutdown due to the coronavirus.
Is it too late to invest in REA shares?
Despite the recent rally in the REA Group share price, I don't believe it is too late for investors with a long-term investment horizon to purchase shares. REA Group shares closed on Friday at $95.17, which is still well below its peak in February of $117.30. I believe there is still potential for more upward movement in its share price, as the further opening up of the nationwide property market in the months ahead is likely to lead to increased property listings.
I also believe that the long-term outlook for REA Group still looks bright due to the fast-growing Australian residential property market, driven by overseas migration. In addition, REA Group looks set to capitalise over the next few years on its growing international business divisions. In my view, this places it in a better position than its main rival in Australia, Domain Holdings Australia Ltd (ASX: DHG), which only has a local presence.
