The REA Group Ltd (ASX: REA) share price hit an all-time record high of $142.28 this morning. This follows the company's upbeat first quarter FY21 result and surge in the broader ASX 200. The REA share price has since retreated, however, dropping 2.82% to $135.56 at the time of writing.
Value higher but growth lower
Trading on the ASX today has witnessed cyclical and more value-orientated sectors such as energy, industrials, financials, travel and real estate push higher. While growth-related industries such as information technology, e-commerce and consumer discretionary have been sold down quite significantly so far.
The REA share price increased almost 20% in the last 5 trading sessions from trough to peak. But its rapid share price appreciation combined with today's broad growth sector sell-off point to a likely close in the red.
A look at REA's quarterly results
The REA quarterly delivered flat operational and financial metrics at face value. In the September quarter, revenues slipped 3% to $195.7 million while earnings before interest, tax, depreciation and amortisation (EBITDA) increased 8% to $123.8 million. The quarter reflected diverging impacts of the coronavirus pandemic with overall national residential listings declining 2%.
The second wave of COVID-19 restrictions in Melbourne caused a significant decline in listings with volumes declining 44% for the quarter. In contrast, NSW showed signs of continued market recovery with a 23% increase in listings for the quarter.
In October, national residential listings were down 1% with increases in Melbourne and Sydney of 14% and 2% respectively, offset by declines in other markets. While there have been positive signs of real estate market recovery more broadly speaking, the company remains uncertain over the longer term impacts of COVID-19, especially on areas such as consumer confidence, unemployment and the economy.
What did the big brokers think?
Big brokers shrugged off the element of uncertainty with a series of REA share price upgrades. This follows the general census that the quarterly performance was better than expected, costs were well managed and longer term growth opportunities remain intact.
Credit Suisse upgraded its price target from $109.00 to $123.50 and UBS raised its price target from $107.00 to $130.00. Broker target prices currently represent a 5-10% discount to REA's current price of $135.56.
