REA Group Ltd (ASX: REA) shares closed down 2.0% trading for $244.97 apiece on Friday following the company's third-quarter results release.
In early afternoon trade on Monday, shares in the S&P/ASX 200 Index (ASX: XJO) online property listings company are down another 2.0%, changing hands for $240.14 each.
For some context, the ASX 200 is up 0.3% at this same time.
So, are REA Group shares now a buy, sell, or hold following those results?
We'll take a look at what Macquarie Group Ltd (ASX: MQG) is now recommending below.
But first…
What did the ASX 200 stock report on Friday?
REA Group shares came under selling pressure on Friday, despite the company reporting revenue for the three months to 31 March of $374 million, up 12%.
That sees revenue for the first three quarters of FY 2025 up 18% year on year to $1.25 billion. However, as the Motley Fool's James Mickleboro noted, "This is a slower growth rate to what was achieved in the first half, which could explain some of the selling today."
Commenting on the results on Friday, REA Group CEO Owen Wilson said, "REA delivered a strong third quarter result underpinned by double-digit yield growth as we continued to drive increased value for customers across our premium products."
REA Group shares: Buy, sell, hold?
Following Friday's results, Macquarie forecasts that REA Group shares can deliver a 20% plus three-year earnings per share (EPS) compound annual growth (CAGR) to FY 2027, with the Australian Residential listing business generating 10% plus annual revenue growth.
The broker also noted that the RBA's first interest rate cut in February, "combined with expectations of more to come, is supporting buyer demand".
Throwing some uncertainty into the outlook for the ASX 200 stock, Macquarie said, "A key debate currently is whether Domain Holdings Australia (ASX: DHG) becomes more competitive under Costar Group Inc's (NASDAQ: CSGP) ownership."
The analysts noted that REA has outpaced Domain for residential revenue growth by around 4% each period.
Connecting the dots, Macquarie concluded:
With the risk of increasing competition in the Australian online property market via CoStar / Domain, it is hard to justify that REA can see a multiple re-rate, whilst trading 49x 12-months forward P/E, to support a more constructive recommendation than neutral at this point.
Despite the broker's neutral recommendation, Macquarie does have a $265.00 target price for REA Group shares. That represents a potential upside of more than 10% from current levels.
With today's dip factored in, shares in the ASX 200 stock remain up 30% since this time last year.
