REA Group Ltd (ASX: REA) shares could be good value after pulling back by 33% from their high.
That's the view of analysts at Bell Potter, who are recommending the ASX 200 share as a buy to clients.
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What is the broker saying about this ASX 200 share?
Bell Potter was pleased with REA Group's quarterly update, highlighting that the realestate.com.au operator delivered a resilient result despite rising interest rates. It said:
REA reported a resilient Q3 update in a rising interest rate environment, with 1% growth in listings driven by strong Melbourne (+7%) and Sydney (+4%) performance. Residential Buy yield of +14% for the quarter was ahead of BPe FY26 (12%) and was supplemented by the Mel/Syd volume outperformance. Commercial and Financial Services segments grew revenues double digits, while a focus on core Housing.com revenue in India helped reduce Group opex on a like-for-like basis to 5% growth offset by 9% growth in Aus; Group margin increased by 221bps YoY to 55.3% for the quarter.
Another positive is that the broker believes that REA Group's outlook is improved despite a deterioration in market conditions. It adds:
REA guided to an 8% average price increase for FY27e, which is well ahead of Domain's 4% increase aimed at undercutting REA on price to take market share; our read-through is that REA remains confident in proving value against price leveraging its superior audience with REA attracting and engaging the buyer for 9 out of 10 homes listed on-platform and go on to sell, according to independently reviewed and validated data provided to end-users.
Recent acquisition iGuide is expected to assist against the CoStar integration of Matterport into Domain. REA see's the market entering a balanced phase following a period of demand exceeding supply; our forecast for -2% listings decline in FY27e is unchanged.
Market-beating potential returns
According to the note, the broker has retained its buy rating on the ASX 200 share with an improved price target of $217.00 (from $211.00).
Based on its current share price of $176.89, this implies potential upside of almost 23% for investors over the next 12 months.
Commenting on its buy recommendation, Bell Potter said:
While we recognise the potential for disruption in a rapidly evolving environment, we currently see the multiple compression as overdone considering that REA's moat lies in decades of property, customer and buyer intent data and inherent network effect via established and highly engaged audience. Therefore, REA's shareholder value sits below the user interface level which is difficult to replicate. Retain Buy.
