REA Group Ltd (ASX: REA) shares are down 1.43% on Thursday to $233 while the S&P/ASX 200 Index (ASX: XJO) is down 0.12%.
Top broker Macquarie recently released a note about Australian residential listings volumes.
The note included the broker's latest rating and share price target for REA.
A share price target is a broker's best guess as to what price a stock will be trading at in 12 months' time.
Let's take a look.
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Macquarie's verdict on REA shares
REA is well-known for its online property advertising website, realestate.com.au, which is the market leader in Australia.
Based on current trends, Macquarie forecasts 1.5% growth in listings in FY25 for the REA business.
This would reflect 5% growth in 1H FY25 and a 2% decline in 2H FY25.
Macquarie said industry listing volumes in the second busiest season of the year, Autumn, were down 5% compared to 2024.
However, the broker noted the impact of the Federal Election on Saturday, 3 May, which reduced auction volumes on the day.
The broker maintains a neutral rating on REA shares.
Macquarie said it had factored in macroeconomic conditions, which would include the start of an interest rate-cutting cycle in Australia.
Cotality said the two interest rate cuts this year have already buoyed the market and arrested price declines that began in late 2024.
The broker also looked at REA's innovation and development of new high-yielding products, as well as its ability to raise prices across all products.
Macquarie also considered REA's offshore market performance and whether its Indian division could return to growth.
The broker also considered threats of new entrants and/or competition from peers.
This is particularly relevant given REA's primary competitor in Australia, Domain Holdings Australia Ltd (ASX: DHG), is being bought out by US commercial real estate data and analytics company, CoStar Group, Inc. (NASDAQ: CSGP).
Risk of fines amid ACCC investigation
Macquarie also considered the risk of penalties or restrictions in REA's future, given that the Australian Competition and Consumer Commission (ACCC) has launched an investigation into whether REA is abusing its market power through excessive pricing.
Goldman Sachs has previously flagged that rising prices will likely lead to sellers choosing one platform over the other at some point.
If this occurs, REA will be in pole position as the market leader.
REA says an average of 12.3 million people visited realestate.com.au each month during the March quarter.
REA said 6.4 million of them only looked for homes on realestate.com.au.
Currently, it is common for vendors to pay for advertising on both realestate.com.au and domain.com.au.
What are REA shares worth?
Macquarie has trimmed its 12-month price target on REA shares to $265. This is down from $270 in February.
The team at Bell Potter has a similar valuation on REA shares. Bell Potter has a buy rating on REA shares with a $267 target.
Citi also has a buy rating on REA shares with a higher price target of $275.
