What happened to the REA Group Share Price?
Shares in the owner of property advertiser realestate.com.au REA Group Ltd [ASX:REA] sagged by more than 1.5% today, with the selloff more pronounced than the risk-off mood of the broader market. REA Group has now tumbled by more than 18% since its shares hit an all-time high in early March.
Why did this happen to the REA Group Share Price?
This morning a story emerged that Melbourne’s real estate agents are pushing back against successive price increases in REA’s ad costs.
300 agencies have appointed a third-party advocate to bargain collectively for fairer ad prices. These agencies spend more than $100 million per year on digital ads with REA.
Anton Staindl, spokesman for the negotiating venture, is ‘very confident that combined, the agents pack a far more powerful punch than they do as individuals.’
The potential for this coordinated action to spread beyond Melbourne has spooked investors, who have marked down REA shares today.
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What now for REA Group Ltd?
REA Group has been a sensational growth story for several years. But it has well and truly become a blue-chip large cap company. It’s at a point where continued outperformance becomes more and more difficult.
As long as realestate.com.au remains the market leader, agents will want to advertise their real estate on the site. But today’s news calls into question whether a sky-high valuation is still appropriate for this stock.
Investors looking for undervalued growth stories should look elsewhere.
Tim Dohrmann+
Small-Cap Analyst, Australian Small-Cap Investigator
