The REA Group Limited (ASX: REA) share price has been in a funk since the start of the year, plunging by 21%.
The property listings business announced its FY22 half-year results earlier this month. Despite smashing expectations, the REA share price has not responded in kind.
At the time of writing, REA shares are swapping hands for $135.23, down 3.07% for the day so far.
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What's dragging the REA share price lower?
Investors have been selling off REA shares despite the company reporting a robust six-month performance in H1 FY22.
While key financial metrics increased in the double-digits, it appears investors were more focused on the outlook for the second half.
REA advised that growth rates are expected to slow down as it cycles through a strong period of listing volumes. In addition, the federal election and potential regulatory measures to slow house price inflation could also negatively impact listing volumes.
As such, management didn't provide any earnings guidance for the full year, which appears to have unsettled investors.
In the days following, the REA share price sank to an 11-month low of $134.11 but has since rebounded slightly.
Is this a buying opportunity?
In an interview with Livewire Markets run by Ally Selby, Elston Asset Management's Bruce Williams and Investors Mutual Limited's Simon Conn gave their view on the REA share price.
Williams touched on the company's fundamentals but placed a hold on REA shares. He said:
It's just a hold for us at the moment, verging on a sell. It is a very good business. The platform business is very strong domestically, and it's had a great property market. We just struggle to see how they maintain the growth they have achieved because they've done a lot on pricing, premium pricing penetration, as they call it. The property market's been extremely good and it's likely not to roll off, but become a little more steady, which will promote less activity, which is what this company thrives on. So for us on a valuation basis, it's hanging on to a hold.
Conn said sell after being asked if the REA share price is cheap enough. He said:
No, not yet. It's still very full at 41 times going to maybe 35 times next year. There's a lot of good news in the price and as Bruce alluded to, there'll be headwinds going forward over the year in the housing market. Look, it's a great business. It has a great network effect. So they've got some pricing power. There's just a lot of good news baked into the price. We think Domain is a more attractively priced opportunity in that sector and we're playing that by owning Channel Nine which has a 60% holding in Domain, which is quite a bit cheaper than REA.
About the REA share price
Over the past 12 months, REA shares have dropped by around 13% for shareholders. The company's share price is treading close to its 52-week low of $131.33.
On valuation grounds, REA commands a market capitalisation of roughly $18.43 billion, with approximately 132.12 million shares on its registry.
