To say the residential real estate market is hot right now seems rather redundant. Real estate investors, industry professionals, and related businesses are all very aware demand is up and inventory is low. For retail sellers, this may be exciting news, but for Redfin (NASDAQ: RDFN), it's phenomenal. The anticipated slowdown from COVID-19 had a smaller impact than anticipated, and astronomical growth has left Redfin scrambling to keep up with demand. What do the company's financials say about its health and outlook?
Current financial results
Redfin released its annual and quarterly numbers late last month, showing excellent results. Gross profits for fourth quarter 2020 were $80.1 million, up 102% from 2019. Considering Redfin had a net loss in fourth quarter 2019, $14 million in net income this year has been welcome news. Revenues for all of 2020 were up 14% year over year, but these are still impressive results considering the shutdowns and economic uncertainty 2020 brought.
Operating expenses were up 4% overall over 2019 and accounted for 26% of revenue but ultimately resulted in a decrease of 3% from 2019. This was because of the strong demand Redfin has been meeting by bringing on more agents and restarting programs that had been temporarily paused in the first part of 2020.
Redfin hit a record of 42 million average monthly users, with over 21,000 video tours offered in the fourth quarter of 2020 alone. This is a mind-boggling 137-fold increase in monthly video tour requests since the start of the pandemic in March. Clearly, Redfin's online platform has been a critical tool for retail buyers to safely, efficiently tour homes and make quick offers so they don't have to watch homes slip through their fingers during a bidding war.
What this means for investors
Despite these positive results, share prices tumbled in late February 2021 due to uncertainty over continued gains in the current housing market. Considering Redfin’s market share is just over 1% of U.S. existing home sales, there's a lot of room for this company to expand in the future. However, right now it faces a housing and agent shortage, which stiffens its potential.
Currently, RedfinNow, the company’s iBuying program, is limited to just three major metropolitan areas, but it's set to expand. While RedfinNow is not a major income generator for the company, it does allow it to offer other lucrative services, which makes it worthwhile in the grand scheme of things. With that in mind, direct competition isn't likely at this point, but it's certainly something to keep an eye on.