Redfin (RDFN) stock opened a whopping 75% up on Monday, March 10 following news that Rocket Companies (RKT) is buying the residential real estate brokerage for $1.75 billion.
Rocket expects the RDFN acquisition to result in over $200 million of run-rate synergies by 2027. The transaction is expected to close by the third quarter of this year.
While Redfin shares have rallied hard in recent hours, investors should note that it may not be too late to load up.
Is It Too Late to Invest in Redfin Stock?
The all-stock agreement that RKT announced this morning values Redfin at $12.50 a share.
In comparison, shares of the real estate listing platform are currently going for less than $10, indicating a buying opportunity since the Rocket deal does not look fully backed into RDFN yet.
Plus, once the transaction is complete, Redfin investors will receive 0.7926 units of Rocket stock for each share of the Seattle-headquartered firm they own.
So, if the acquisition proves accretive to RKT’s earnings as expected, and the stock outperforms after the deal closes, those who stuck with Redfin through its combination with Rocket Companies may be rewarded well.
Versus its 52-week high in September, Redfin stock is still down some 30% at the time of writing.
Redfin Expects Weakness in Its Q1
Detroit-based Rocket Companies is buying Redfin despite the expected weakness in its financials.
In February, the Nasdaq-listed firm reported better-than-expected revenue for its fourth financial quarter but warned of some softness in Q1.
Redfin expects its revenue to fall in the range of $214 million to $225 million in its current quarter. Analysts, in comparison, were at a much higher $244 million.
On the plus side, however, the Redfin buyout will bring significantly more exposure to Rocket’s mortgage products considering the former currently draws about 50 million visitors monthly.
Wall Street’s View on Redfin Stock
Heading into today, Wall Street had a consensus “Hold” rating on Redfin stock.
Nonetheless, analysts saw upside in shares of the real estate listing platform to $8 on average that indicated potential upside of nearly 40% on their previous close. The high price target of $12.50 is in line with the per-share purchase price.
