The REA Group Ltd (ASX: REA) share price has been one of the worst performers in the S&P/ASX 200 Index (ASX: XJO) over the last year, dropping by more than 40%.
The last time the REA Group share price fell that far (in percentage terms) was four years ago, almost half a decade ago, as the chart above shows.
The owner of realestate.com.au, realcommercial.com.au and so on is facing a challenging environment. Higher interest rates and changes to property taxation (negative gearing and capital gains tax) are both headwinds to property demand and prices.
They are certainly major headwinds for the foreseeable future, which is why the market is more pessimistic. But now that it's cheaper, it could be an oversold opportunity.
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Is the REA Group share price an opportunity now?
Lower property prices are a headwind for REA Group's ability to increase its property advertising fees, which has been a very useful driver of profit growth.
As we saw in the first half of FY26, while national buy listings declined 6% and there was strong 'buy yield' growth of 14%, helping revenue increase 5% to $916 million and net profit increase 9% to $341 million. Losing some/all of this earnings tailwind could be painful.
But, on the other hand, property sellers may need to work harder to sell their property by paying for better advertising features.
Additionally, while property prices in Sydney and Melbourne may be hurting right now, it's possible that elevated interest rates could cause more forced sales, helping volumes for REA Group.
I think it's also useful to remember that negative gearing will still exist for purchases of new builds, so there could be a period of adjustment followed by increased investor demand for new properties. Plus, owner-occupier demand could rise for existing homes in the longer term. I may be clutching at straws a little there, but it's possible.
In other words, I don't think investors should assume the operating environment is permanently hurt for REA Group – there could be short-term difficulties, but then potential adaptation in the property market. Therefore, this could be an opportunistic time to buy for brave investors.
What do analysts think of the ASX 200 share's valuation?
According to CMC Invest, the business is now valued at 28x FY26's estimated earnings. There have been five broker ratings on the REA Group share price in June, with two of those being a buy, two being a hold and one being a sell.
The average REA Group share price target of those five calls this month is $172.83, implying a possible rise of 24% over the next year from where it is at the time of writing.
So, analysts are not expecting a recovery back above $200 any time soon, but the business looks undervalued according to those analysts.
