The REA Group Ltd (ASX: REA) share price has dropped an incredible 31% over the past six months, a significant decline for a business worth tens of billions of dollars. But analysts are optimistic that the business can rebound in the coming year.
REA Group is an online advertising business that specialises in real estate, with its key business being realestate.com.au. It also has businesses across mortgage broking, property data, commercial real estate advertising, and more. It also has investments across international websites, including a majority ownership of REA India.
The business recently reported its results for the six months to 31 December 2025. With its core operations, it reported revenue growth of 5% to $916 million, underlying operating profit (EBITDA excluding associates) growth of 6% to $569 million, and net profit growth of 9% to $341 million.
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Is the REA Group share price an opportunity?
Broker UBS believes that the sell-off appears overdone as the AI narrative "continues to dominate", with competition also potentially weighing on the stock.
The broker suggested that the core residential business performed as expected, which gave UBS comfort on the sustainability of the growth in the medium term.
UBS said that the concerns are valid, but they have yet to see meaningful evidence of those impacts in the results.
REA Group continues to believe that it can deliver rising profit margins, which the broker thought was "positive in light of market's fears on AI cost pressure".
UBS said that while AI spend is increasing, it is a "new tool" to help optimise customer experience and substitute existing tech spend, rather than adding incremental pressure on cost growth.
The broker commented on its potential to deliver yield growth:
We remain confident on REA's ability to deliver double digit yield growth over next 3 years (UBSe +13%). For FY27e, we see a likely mid to high single digit price rise in FY27e plus mid single digit contribution from further penetration of Amax and Luxe. This is despite potential discounting behaviour from competitors.
Industry feedback suggests REA still delivers largest number of buyer enquiry leads to agents, driven by continued growth in audiences (146.1m avg monthly visits in 1H26, vs 132.2m in FY25). Management noted traffic from AI remains from AI remains <1% and recently declined (although early days), further suggesting strength in direct eye-balls to platform.
How much capital growth could it deliver?
The business is rated as a buy by UBS, with a price target of $218.90, implying a possible rise of around 28% within the next year from where it is at the time of writing.
UBS explained that the business seems cheap compared to its valuation multiples of the last five years:
We reiterate our Buy rating on REA. Whilst difficult to know where the valuation support would be in the current market environment, REA is trading today on 18.5x fwd EBITDA, 31x fwd P/E both more than 1SD below last 5yr averages, which we view as attractive for a stock continuing to deliver resilient double digit earnings growth, and most AI defensive across our Online Classifieds coverage.
