REA Group Shares Deliver Mixed Performance despite ‘Exceptional’ Result (ASX:REA)

REA Group Shares Deliver Mixed Performance despite ‘Exceptional’ Result (ASX:REA)

Digital property advertiser REA Group Ltd [ASX:REA] is having an up and down day of trading.

Despite opening strongly (up 3.8% at one point), the share price has capitulated. REA shares are now sitting at a 1.37% loss for the day, after traders have abandoned the stock.

So what’s behind this volatile move?

Let’s take a closer look and find out…

Exceptional result gets an exceptional reception

The primary cause for REA’s share price movement today is the release of their half-year results — data that, for the most part, is all extremely positive.

Revenue is up 37% to $590 million, earnings are up 27% to $368 million, and net profit is up 31% to $226 million.

That’s an enviable performance compared to most companies. However, with their $18.77 billion market cap, REA has an expectation of exceptional growth. So, from this point of view, it’s possible that some shareholders may have been hoping for more, particularly given the hot property market of late.

As CEO, Owen Wilson, noted himself:

As anticipated, the removal of COVID restrictions saw a wave of new listings on, with sellers making up for the time lost in lockdown and taking advantage of the significant buyer demand. Combined with record take up of our premium listing products in Residential and Commercial, we delivered very pleasing revenue growth.

Our flagship site continued its position as the number one address in property. In October, a record of 145.5 million visits to were achieved and the site has grown to be Australia’s seventh largest online brand.

Clearly management is choosing to look at the positives, something that has given them the confidence to boost their interim dividend to 75 cents per share. A 27% increase that is bound to please yield-hungry investors.

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What does the future hold for REA?

All in all, despite REA’s dip into the red, I think investors should be pleased with today’s result. In fact, part of the selling pressure may be coming from profit takers.

What will be far more interesting is seeing how REA’s results hold up in the quarters to come. Because as ongoing talk of inflation and interest rates continues, the property market may be in for some change.

How that will affect REA’s business is something shareholders should keep an eye on.

In particular, if you’re holding this stock for its dividend payouts, you may want to be wary.

Fortunately, there are plenty of alternatives for income investors. Dividend paying stocks are plentiful across the ASX. So much so that you may have a hard time picking the best of the best.

But don’t worry, we can help.

Our dividend stock report, written and curated by our own Greg Canavan, has all the info you need. Not only does he discuss why dividend stocks are a great investment to include in a portfolio, he also names his five top dividend stocks for 2022 and beyond.

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Ryan Clarkson-Ledward,
For Daily Reckoning Australia

PS: Our publication The Daily Reckoning is a fantastic place to start your investment journey. We talk about the big trends driving the most innovative stocks on the ASX. Learn all about it here.