Despite recent weakness, REA Group Ltd (ASX: REA) shares have been on fire over the past 12 months.
During this time, the ASX 200 stock has risen almost 30%. This is more than triple the return of the market over the same period.
Is it too late to buy this ASX 200 stock?
The good news for investors is that analysts at Goldman Sachs don't believe it is too late to buy the realestate.com.au operator's shares. This is especially the case given the launch of the new Luxe Listings offering last month.
Commenting on the launch, the broker said:
REA launched its Luxe Listings offering to the market in July-24, as an optional listing upgrade for Premiere+ customers, providing improved listings exposure (i.e. homepage visibility on app/web, larger listing, push notifications) and enhanced data/insights (i.e. listings viewer analysis) but at a c.90% premium to standalone Prem+ pricing.
We believe Luxe listings: (1) highlight an increased focus on targeting passive / out of suburb buyers of REA listings, leveraging its significant user data/profiles; (2) target improving REA share of marketing budgets for high-end properties (i.e > $5mn), supporting overall yield growth; and (3) provide additional unique benefits to Prem+ agents, providing reason for non-Prem+ agents to upgrade.
But is this offering going to be a success and will sellers be able to justify the higher cost?
Well, more good news is that Goldman has received early feedback that has been positive. Though, it concedes that the feedback is only limited at this stage. It commented:
The key unknown since launch has been the early performance of the product in market, and whether it justifies the higher cost. Based on our early (limited) feedback within the Sydney market, signs are positive. This includes: (1) The relative listing views/property saves of an REA Luxe Listing vs. Domain during Week 1 of a campaign, relative to a Prem+ listing significantly outperformed (i.e. 104%/117% of DHG, vs. 66/70% for Prem+); (2) Agent feedback suggests that 3 of the 27 Property Inspections that occurred during the week were from out of suburb buyers, who found the property through the Luxe homepage advert; and (3) Agent feedback more broadly suggests that Luxe Listings are delivering results ahead of Prem+ across the Sydney market.
Buy rating reaffirmed
In response to the launch, Goldman has retained its buy rating and $223.00 price target on the ASX 200 stock.
Based on its current share price of $197.95, this implies potential upside of almost 13% for investors over the next 12 months. It also expects a modest 1% dividend yield over the next 12 months.
Goldman concludes:
Overall we are encouraged by this feedback, supporting our positive view on REA, which is underpinned by our above-consensus view around the longevity of its double-digit yield growth in Australia.
