Despite the housing market downturn, the REA Group Ltd (ASX: REA) share price has been on fire this year.
Since the start of the year, the property listings company's shares have risen a sizeable 28% to $142.20.
But don't worry if you think you might have missed the boat with this ASX 200 share. That's because one leading broker believes its shares can climb to a new 52-week high and then some more.
This ASX 200 share has 'one of the best risk/reward profiles'
According to a note out of Goldman Sachs, its analysts have retained their conviction buy rating on this ASX 200 share with an improved price target of $164.00.
Based on the current REA share price, this implies potential upside of 15% for investors over the next 12 months.
What is the broker saying?
Goldman notes that REA and Domain Holdings Australia Ltd (ASX: DHG) are increasing prices for FY 2024 more than it was expecting. It commented:
FY24 price increases more material than expected, comprising: (1) REA Premiere+ pricing +9-13% (+9% MEL, +12.5% SYD, +13% TAS) with more aggressive Premiere All increases (i.e. > 20% in TAS) – suggesting that REA is continuing its playbook of targeting higher increases on its lower tiered products to entice agents to move up the tiers and increase overall spend (i.e. Prem All to Prem+ is c.30% price increase).
These prices are more material than we had anticipated for both REA/DHG (GSe prior +8%), but we are marginally surprised for DHG to not match REA in Sydney. We also note that given the digital marketing budget remains immaterial vs. the overall transaction costs, we remain bullish on the long term opportunity to continue growing yields.
In light of this, the broker highlights that REA has "one of the best risk/reward profiles in our domestic media coverage. In particular, we are positive on the pricing power of the real estate classified vertical, given that we believe budgets will rise (at the expense of commissions), and within existing budgets, REA, as a leading player in the vertical, under-monetises its lead generation."
All in all, the broker believes this makes REA "among the highest-quality names in our coverage, given it has the highest ability to continue to drive pricing."
And with this ASX 200 share currently trading on multiples well below historical levels, the broker sees plenty of value on offer right now and has it on its coveted conviction list.
