UBS assesses a strong 3Q result for REA Group though lowers its earnings forecasts due to a weaker residential volume outlook in FY23. Also, given weakness in building approvals figures there’s expected to be softness in developer revenues.
Nonetheless, should investors be willing to look through the cycle, the analyst sees value emerging and upgrades the rating to Buy from Neutral. At the same time, it’s acknowledged the upgrade may be early given the premium valuation and near-term uncertainty.
A fall in target to $130 from $155 reflects the analyst’s earnings downgrades and change to the UBS near-term risk-free rate assumption to 3.5% from 2.5%.
Sector: Media.
Target price is $130.00.Current Price is $112.85. Difference: $17.15 – (brackets indicate current price is over target). If REA meets the UBS target it will return approximately 13% (excluding dividends, fees and charges – negative figures indicate an expected loss).
