Why Did REA Group Shares Sink Nearly 10% Despite a Buyback Boost?
Source: Kapitales Research
Highlights:
REA Group Ltd (ASX: REA) shares slid nearly 10% in early trade after first-half profit of $341 million came in 1–2% below market expectations, at the time of writing.
A slowdown in national property listings, down 8% year-on-year in January, and rising operating costs in Australia weighed on investor confidence.
While the company announced a $200 million share buyback, analysts warned of potential earnings downgrades and near-term share price underperformance.
Market Reacts Sharply to Earnings Miss
Shares of REA Group Ltd (ASX: REA) (came under heavy selling pressure on Thursday, plunging almost 10 per cent in early trade after the real estate listings giant delivered a first-half result that narrowly missed market expectations. At the time of writing, the stock was trading at $164.16, down $18.23 or 9.99 per cent, reflecting investor concerns over softer listings growth and rising costs. REA Group reported a year-on-year increase in core profit to $341 million for the half. However, the figure came in around 1–2 per cent below consensus forecasts, according to Citi. While EBITDA was broadly in line with expectations, a higher tax bill dragged overall profit below Citi’s estimates, overshadowing what was otherwise a solid operational performance.
Listings Slowdown Raises Red Flags
A key concern highlighted by analysts was the slowdown in national property listings. Citi analyst Siraj Ahmed pointed out that listings were down 8 per cent year-on-year in January, signalling weaker activity across the Australian housing market. This softness, combined with “negative operating jaws” — where operating costs are rising faster than revenue — weighed heavily on sentiment. In Australia, REA’s core market, operating expenses continued to climb, putting pressure on margins despite stable revenue growth. Citi noted that these factors could lead to a low single-digit downgrade to FY26 net profit expectations if conditions fail to improve.
Buyback Not Enough to Calm Investors
The company’s announcement of a $200 million share buyback offered some support, but it wasn’t enough to offset concerns about future earnings risk. Ahmed warned that, despite the buyback, REA Group’s shares could underperform in the near term given the softer listings outlook, reiterated operating expense guidance, and elevated tax rate. At the time of writing, the stock was still trading about $18 above its 52-week low, but the sharp reaction shows investors are cautious. This earnings update and market response have already been widely covered across financial news platforms and broker notes, underscoring how closely watched REA Group remains in Australia’s equity market.
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The materials provided by Kapitales Research, including articles, news, data, reports, opinions, images, charts, and videos ("Content"), are intended for personal, non-commercial use only. The primary goal of this Content is to educate and inform readers. This Content is not meant to offer financial advice, nor does it include any recommendation or opinion that should be relied upon for making financial decisions. Certain Content on this platform may be sponsored or unsponsored, but it does not serve as a solicitation or endorsement to buy, sell, or hold any securities, nor does it encourage any specific investment activities. Kapitales Research is not authorized to provide investment advice, and we strongly advise users to seek guidance from a qualified financial professional, such as a financial advisor or stockbroker, before making any investment choices. Kapitales Research disclaims all liability for any direct, indirect, incidental, or consequential damages arising from the use of the Content, which is provided without any warranties. The opinions expressed by contributors or guests are their own and do not necessarily reflect the views of Kapitales Research. Media such as images or music used on this platform are either owned by Kapitales Research, sourced through paid subscriptions, or believed to be in the public domain. We have made reasonable efforts to credit sources where appropriate. Kapitales Research does not claim ownership of any third-party media unless explicitly stated otherwise.
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Why Did REA Group Shares Sink Nearly 10% Despite a Buyback Boost?
Highlights:
Market Reacts Sharply to Earnings Miss
Shares of REA Group Ltd (ASX: REA) (came under heavy selling pressure on Thursday, plunging almost 10 per cent in early trade after the real estate listings giant delivered a first-half result that narrowly missed market expectations. At the time of writing, the stock was trading at $164.16, down $18.23 or 9.99 per cent, reflecting investor concerns over softer listings growth and rising costs. REA Group reported a year-on-year increase in core profit to $341 million for the half. However, the figure came in around 1–2 per cent below consensus forecasts, according to Citi. While EBITDA was broadly in line with expectations, a higher tax bill dragged overall profit below Citi’s estimates, overshadowing what was otherwise a solid operational performance.
Listings Slowdown Raises Red Flags
A key concern highlighted by analysts was the slowdown in national property listings. Citi analyst Siraj Ahmed pointed out that listings were down 8 per cent year-on-year in January, signalling weaker activity across the Australian housing market. This softness, combined with “negative operating jaws” — where operating costs are rising faster than revenue — weighed heavily on sentiment. In Australia, REA’s core market, operating expenses continued to climb, putting pressure on margins despite stable revenue growth. Citi noted that these factors could lead to a low single-digit downgrade to FY26 net profit expectations if conditions fail to improve.
Buyback Not Enough to Calm Investors
The company’s announcement of a $200 million share buyback offered some support, but it wasn’t enough to offset concerns about future earnings risk. Ahmed warned that, despite the buyback, REA Group’s shares could underperform in the near term given the softer listings outlook, reiterated operating expense guidance, and elevated tax rate. At the time of writing, the stock was still trading about $18 above its 52-week low, but the sharp reaction shows investors are cautious. This earnings update and market response have already been widely covered across financial news platforms and broker notes, underscoring how closely watched REA Group remains in Australia’s equity market.
Disclaimer for Kapitales Research
The materials provided by Kapitales Research, including articles, news, data, reports, opinions, images, charts, and videos ("Content"), are intended for personal, non-commercial use only. The primary goal of this Content is to educate and inform readers. This Content is not meant to offer financial advice, nor does it include any recommendation or opinion that should be relied upon for making financial decisions. Certain Content on this platform may be sponsored or unsponsored, but it does not serve as a solicitation or endorsement to buy, sell, or hold any securities, nor does it encourage any specific investment activities. Kapitales Research is not authorized to provide investment advice, and we strongly advise users to seek guidance from a qualified financial professional, such as a financial advisor or stockbroker, before making any investment choices. Kapitales Research disclaims all liability for any direct, indirect, incidental, or consequential damages arising from the use of the Content, which is provided without any warranties. The opinions expressed by contributors or guests are their own and do not necessarily reflect the views of Kapitales Research. Media such as images or music used on this platform are either owned by Kapitales Research, sourced through paid subscriptions, or believed to be in the public domain. We have made reasonable efforts to credit sources where appropriate. Kapitales Research does not claim ownership of any third-party media unless explicitly stated otherwise.
Customer Notice:
Nextgen Global Services Pty Ltd trading as Kapitales Research (ABN 89 652 632 561) is a Corporate Authorised Representative (CAR No. 1293674) of Enva Australia Pty Ltd (AFSL 424494). The information contained in this website is general information only. Any advice is general advice only. No consideration has been given or will be given to the individual investment objectives, financial situation or needs of any particular person. The decision to invest or trade and the method selected is a personal decision and involves an inherent level of risk, and you must undertake your own investigations and obtain your own advice regarding the suitability of this product for your circumstances. Please be aware that all trading activity is subject to both profit & loss and may not be suitable for you. The past performance of this product is not and should not be taken as an indication of future performance.
Kapitales Research, Level 13, Suite 1A, 465 Victoria Ave, Chatswood, NSW 2067, Australia | 1800 005 780 | info@kapitales.com.au