REA Group Ltd (ASX: REA) shares have been having a tough time over the past 12 months.
During this period, the ASX 200 blue chip has tumbled approximately 31%.
Is this a buying opportunity for investors? Let's see what Bell Potter is saying.
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Is it time to buy this fallen ASX 200 blue chip?
Unfortunately, the team at Bell Potter isn't in a rush to buy REA Group shares right now.
In fact, it continues to think that investors should be avoiding the realestate.com.au owner ahead of its results release. It said:
In this note we have previewed the upcoming FY26 result for REA, examined sensitivities for potential FY27 earnings growth against two key swing factors for us in listings growth and EBITDA margin, and looked at historical guidance trends. Key takeaways: (1) We are broadly in-line with consensus for FY26, forecasting 11% adj. EPS growth on a like-for-like basis; (2) Downside risk remains to earnings and share price depending on listings and margin outlook; (3) We will look for guidance commentary around level of opex growth to indicate internal revenue/listings expectation for FY27.
According to the note, the broker has retained its sell rating on the ASX 200 blue chip with an improved price target of $144.00 (from $137.00). This implies potential downside of approximately 12% from current levels.
Commenting on its investment thesis, Bell Potter said:
Our TP is upgraded to $144ps on REA India exit and model roll forward; we retain a Sell recommendation in-line with our structure. We continue to see downside risks to FY27 consensus EPS via listings volumes, however we see near-term upside risk from late FY26 momentum into July listings to support sentiment out of the result before headwinds from market conditions negatively impact volumes.
Our downside risk to FY27 listings is driven by: 1) Elevated near-term RBA cash rate forecast driving softening in demand for lending, 2) Recent budget measures adversely impacting investment in property as an asset class, largely in the investor book partially offset by owner-occupied; 3) Both factors combining to negatively impact average national dwelling values and listing volumes more than offsetting Buy yield for REA; and 4) REA's history of EPS declines in a falling 12mth average dwelling price environment.
Is anyone bullish?
Bell Potter may be bearish, but not everyone is.
For example, a recent note out of Morgan Stanley reveals that its analysts have an overweight rating and $230.00 price target on REA Group's shares. This implies potential upside of approximately 40% for investors.
Elsewhere, Citi has a buy rating and $182.75 price target, which offers 12% upside.
