The REA Group Limited (ASX: REA) share price fell heavily during the early phase of the coronavirus pandemic. However it has rebounded strongly since late March, rising from a low of $65.02 on 23 March to be trading at $105.21 at the time of writing. That's an impressive gain of 61.8%.
The Australian housing sector has held up surprising well during the coronavirus pandemic, and REA Group has also performed relatively well from a financial perspective, despite challenging market conditions.
So, with that being said, is the REA Group share price in the buy zone right now?
Early signs of recovery in the residential property sector
Australian national housing market indicators have shown signs of improvement since April, according to recent research by Corelogic. The easing of COVID-19 restrictions has seen the reintroduction of open for property inspections and on-site property auctions, which has helped drive property listing volumes back towards pre-COVID-19 levels.
However, Victoria's second coronavirus lockdown now throws a spanner in the works. Its impact on the national recovery is yet to be factored in, as open for inspections and auctions now appear to be on hold for at least 6 weeks in that state
Solid recent financial performance
REA Group managed to achieve a solid 1% increase in overall revenues for Q3 FY2020 to $199.8 million, despite all the challenges posed by the coronavirus pandemic.
It also posted earnings before interest, tax, depreciation and amortisation growth of 8%, which I believe is a very strong result considering the challenging environment.
It will be interesting to see how REA Group performed during the fourth quarter. Although market conditions did improve during May and June, the fourth quarter was exposed to the impact of the pandemic for the full 3-month period, unlike the third quarter.
Is the REA Group share price a buy right now?
There's no doubt that REA Group still has strong headwinds to face over the short-term. While the improvement in the residential housing market during May and June is encouraging, the second lockdown in Victoria will definitely slow down the national housing recovery.
However despite its short-term challenges, I believe that the long-term growth potential for REA Group remains strong, and therefore REA Group is in my buy zone right now. Although the REA Group share price has seen a strong rally since late March, it is still below its pre-COVID-19 level.
While growth in Australia has slowed in a maturing market in recent years, local growth potential remains reasonably strong due to a growing population. I also remain confident that overseas growth potential still remains very strong for REA Group, particularly in Asia. I believe this is likely to drive above average shareholder returns over the next 5 years.
