Could you comment on REAL earnings?
Once the dark cloud of interest rate hikes subside it appears REAL may grow again, at least that is what management seem to be saying? Do they have enough cash to to holdout until then?
Many thanks for your expertise
Stephane
REAL’s revenue declined quite significantly in the quarter as expected due to weak mortgage demands. In 2Q-2023, REAL’s revenue declined -60% to $37.6M, beating the estimates of $35.8M and EPS is -$0.03 also beating estimates of -$0.04. The balance sheet is strong, with no long-term debt and a net cash position of $42M. Although the trailing twelve-month cash flow is not good around -$12M. We think the strong cash on hand would help REAL go through tough times up to a point. With negative cash flow it will only last so long. Based on consensus estimates, sales are expected to decline by -50% in 2023, and then recover strongly in the next few years as rates peak.
The company has a track record of strong organic growth and repurchasing shares over the last few years, but it has disappointed many investors wih over promises. The business depends significantly on the health of the real estate market and mortgage demands, which are highly sensitive to interest rates. We think shares of REAL could do well as we come out of recession and rates get lowered, but we would temper expectations for this year.