Macquarie upgrades REA Group on 'solid fundamental outlook'
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The news: Macquarie analysts have upgraded REA Group from 'neutral' to 'outperform', noting the digital advertising company's "solid fundamental outlook" over the next six to 12 months.
The numbers: The analysts hiked their target price on REA by 8% to $212 from $196, reflecting uplifts to earnings-per-share estimates of 3% in FY24, 2% in FY25 and 2% in FY26.
REA shares last closed at $149.49, having gained nearly 40% over the last 12 months.
The analysts said they expect a "solid FY24 result" resulting in a buy yield of 21%, above guidance of 18% to 19%.
They also anticipate listings improving 16% year on year in the second half of 2024, resulting in FY24 of 10%, above guidance of 5% to 7%.
The context: Macquarie analysts anticipate a better-than-expected FY24 result for REA based on greater penetration of its digital marketing solution Premiere+, as well as geographical mix from more listings in NSW and Victoria.
Elsewhere, while REA India has guided reduced year-on-year losses for FY24 EBITDA, the analysts expect the segment to break even "earlier than expected" in FY26.
What they said: "The fundamental outlook in the next six to 12 months should remain solid and underpin incremental earnings upgrades," the analysts said.
"Valuation support limited but relative valuation among marketplaces is starting to look supporting for REA."
The source: Macquarie research
