REA Group Ltd (ASX: REA) shares received a nice boost yesterday on the back of its FY26 results.
Its share price rose over 3% during Thursday's session as investors reacted positively to the company's announcement.
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What did the company report?
As reported by The Motley Fool yesterday, REA Group boosted its final dividend payout by 25%. This came after reporting net profit from core continuing operations of $682.1 million, up 14%.
Additional results included:
- Revenue of $1,793 million, up 7% on the prior year, with operating expenses flat.
- Net profit of $552 million, down 19%.
- A final dividend of $1.73 per share to shareholders on the register on 27 August, with the dividend to be paid on 11 September.
Speaking on the results, REA Group Chief Executive Officer Cameron McIntyre said it was an "excellent" performance.
REA's unparalleled audience and proprietary data firmly position the business as a leading beneficiary of AI. In FY26 this translated into real commercial value for the business, customers, consumers and brokers.
A bumpy ride
It has been a tough 12 months for REA Group, as its share price came under heavy pressure from AI takeover fears.
Its share price remains down 30% over the last year.
However, it seems momentum has turned in its favour over the last month, as its share price has climbed 30% from 12-month lows.
Despite this, the team at Bell Potter appears to still see the company as a sell, anticipating more headwinds over the next year.
Results better than expected
Following the FY26 results, the team at Bell Potter provided updated guidance on the ASX 200 stock.
While the broker retained its sell recommendation, it did view the result as better than expected.
This surprise was driven by resilient listing volumes, continued pricing power, improving margins, strong cash generation, and a more positive FY27 outlook than previously anticipated.
Bell Potter said softer July listings are worth monitoring but do not materially change the constructive outlook.
Downside risk
Based on this guidance, Bell Potter slightly increased its price target on REA Group to $147.00 (previously $144.00).
REA Group shares closed trading yesterday at just over $172 per share.
Even with the slightly increased target, Bell Potter sees a 14% downside.
Despite REA's ability to generate strong results in challenged operating environments, we continue to see significant downside risk to listings volumes/earnings vs. company guidance and consensus and await further data points via lending volumes and market listings before re-considering our thesis.
