Online real estate specialist Redfin Corp (NASDAQ:RDFN) this morning received an “outperform” designation from Wedbush, which also set a $30 price target on the stock, saying in the note that the company’s relationship with technology will help it grow its market share. This vote of confidence in RDFN is noteworthy given the broader sentiment picture across Wall Street.
First of all, nine of the 13 analysts in coverage coming into today had “hold” or “strong sell” ratings on the equity. Going off this, the average 12-month price target sits below current levels, down at $20.83. The security was last seen trading at $22.73.
This pessimism goes beyond the analyst community, however. Near-term options traders are very put-skewed on the security, based on the Schaeffer’s put/call open interest ratio (SOIR) of 2.35. Not only does this show put open interest more than doubles call open interest among contracts expiring within three months, but it ranks in the 82nd annual percentile, showing such a bearish tilt from speculators is rare.
Similarly, short interest is very high on RDFN, accounting for almost 22% of the float. Going by average daily trading volumes, it would take these bears more than 12 days to cover their positions.
All this skepticism is interesting for us as contrarians, when you consider that the stock is off to a hot start in 2019, gaining 57.7% year-to-date. More promising still, the shares just moved past the $21-$22 area that acted as a floor late last year, and could have been seen as potential technical resistance. As such, an unwinding of some of the bearish positions around Wall Street could make Wedbush’s bullish view of Redfin a reality.