It is hard to see reasons for optimism for Redfin after a mixed fourth-quarter report, according to RBC Capital Markets. Analyst Brad Erickson downgraded Redfin to sector perform from outperform, saying in a note to clients on Thursday night that he could no longer defend his bull case for the real estate stock. "We throw in the towel on RDFN as the primary points of our thesis appear broken and unlikely to show enough improvement in the coming year to warrant an Outperform rating," Erickson wrote. "Share gains are simply not materializing at a fast enough rate, home inventory challenges & lack of secular story should make for slower growth and recent agent hiring tilts the gross margin risk/reward unfavorably." After the closing bell Thursday, Redfin reported a smaller-than-expected loss for the fourth quarter and beat on revenue. However, the company's real estate services unit and gross margins missed expectations as gauged by FactSet's StreetAccount. Shares were down more than 20% in premarket trading Friday. Redfin has struggled to grow market share within the industry, and the tight housing market could keep the company from making strides in the near term, RBC said. "Likely persistent inventory challenges through the year mean that core business growth rates are likely to remain depressed ... and in the absence of share gains, the lack of upside potential means a low probability of multiple expansion," the analyst said. RBC slashed its price target to $23 per share from $60. The new target is more than 19% below where the stock closed Thursday, but shares had already fallen below the mark in premarket trading. -CNBC's Michael Bloom contributed to this report.
Glenn Kelman, CEO of Redfin.
David A. Grogan | CNBC
It is hard to see reasons for optimism for Redfin after a mixed fourth-quarter report, according to RBC Capital Markets.