The Real Brokerage has a 50 per cent upside, says Roth

Roth Capital Partners analyst Darren Aftahi kept a “Buy” rating on real estate tech company The Real Brokerage (The Real Brokerage Stock Quote, Charts, News, Analysts, Financials NASDAQ:REAX) in a Tuesday report, saying 2023 has so far turned out well for the company, which just added another group of real estate agents to its stable.

Headquartered in New York City and with offices in Toronto, The Real Brokerage is a tech-powered brokerage firm with mobile applications targeted to real estate agents. The company provides tools to residential agents to enable a faster and simpler home-buying experience through its streamlined platform. 

The company announced on Tuesday that veterans-focused Sentry Residential has merged its national brokerage into The Real Brokerage, adding it to the latter’s existing 500-plus military-focused agents to create a Real Military Division.

The Real Brokerage said the new division will be the first of several planned, while the added agents from the deal push the company above the 10,000-agent mark.

“Surpassing 10,000 agents is a significant milestone,” said Real Chairman and CEO Tamir Poleg in a press release. “The fact that we’ve grown from just over 8,000 agents at year-end to more than 10,000 today, reinforces that our agent-centric model and the community we are building at Real is unlike any other in the industry. Successful groups like Sentry Residential see our growth and shared values as driving factors in their decision to align with Real.”

With a current market cap at $210 million, The Real Brokerage was at a high of just under $4.00 per share at the end of 2021, but the stock dropped to the $1.00-$1.50 range where it’s been trading over the past half-year. (All figures in US dollars.)

Aftahi sees upside from current levels and reaffirmed in his report a 12-month target of $1.75, which at press time represented a projected one-year return of 49.6 per cent.

“With agents exceeding ~10K in early April, we believe REAX is well on track to outgrow our 2Q agent estimate. Additionally, when we consider in 4Q, new agents’ time of onboarding to first sale narrowed to 74 days, which leaves us optimistic these agents can positively impact transactions in 2Q23 as well,” Aftahi said.

“While broadly speaking, transactions remain at the hands of interest rates and lack of supply, we still see the upside to agent count as a leading indicator for higher transaction count, especially when considering REAX has fostered some of the highest-producing agents in the industry,” he wrote.

Up ahead, Aftahi is forecasting REAX to generate full 2023 revenue and EBITDA of $399.5 million and negative $8.3 million, respectively, and 2024 revenue and EBITDA of $420.5 million and negative $6.8 million, respectively.