REA Group shares (ASX:REA) may have made a death cross this week, but with the stock adding 2.73% on Wednesday to close at A$162.99, there was an interesting technical reversal shaping up. With a close above both the 50 day SMA at A$162.22 and the 200 day at A$162.84, momentum may be set to shift.
The timing of the technical recovery comes hot on the heels of the so-called “death cross” formation, where the 50-day SMA crosses below the 200-day SMA. Although the pattern is interpreted as a warning signal for further near-term weakness, it is a lagging indicator, and a relatively slow one at that.
Wednesday’s session effectively invalidated the most immediate bearish read of that signal. With REA’s share price now also trading above the A$160 level, bulls will likely already be eyeing a recovery toward A$175. Up 24% from its 52-week low of A$131.07, yet down 11.8% YTD, there are plenty of eyes on this one as we head towards the final two months of the year.
Latest Financials
Recent fundamentals have been solid, with REA Group’s full-year results showing resilience in its Australian core operations, even as non-operating items weighed on headline figures.
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Core revenue rose 7% to A$1,793 million for the period, with Australian revenue accelerating at a faster 11% clip. Core net profit grew 15% to A$650 million, translating to core earnings per share of A$4.93, also up 15%. The board declared a fully franked full-year dividend of A$2.97 per share, representing a 20% increase on the prior year and a clear signal of management confidence in the sustainability of cash generation.
Margin performance was equally encouraging. Australian operating EBITDA margins expanded to 66%, underpinned by disciplined cost management that kept operating expenses flat at A$705 million despite revenue growth. Free cash flow expanded 17% to A$765 million, providing a strong foundation for ongoing capital returns and strategic investment.
The headline reported net profit figure, however, told a different story. Statutory net profit after tax fell 19% to A$552 million, with the decline driven entirely by a A$111 million non-cash impairment charge related to REA India operations. Markets had largely anticipated the write-down, and the market’s focus quickly returned to the strength of the underlying Australian business once the result was digested.
The Australian housing market itself remains a mixed picture. Interest rate sensitivity continues to constrain home turnover velocity, and listing volume growth has not yet re-accelerated in a meaningful way. However, the onset of the spring property season typically brings a cyclical uplift in transaction activity and higher adoption of premium advertising products.
What To Watch
The technical setup has improved following Wednesday’s close, yet it is still too early to call a firm break. The test of the level, and continuation above will be important in reaffirming the bullish setup.
Bears will continue to the stock’s still-elevated valuation relative to broader market alternatives, the potential for further tech sector multiple compression, and the macro sensitivity of the Australian housing market to any reversal in rate cut expectations. Flat listing volume growth also remains a structural concern if higher-for-longer interest rates persist and suppress home turnover activity.
Bull Case:
- Reclaimed both 50-day and 200-day SMAs, with A$175 as next upside target.
- Core net profit grew 15%, with Australian EBITDA margins expanding to 66%.
- Buy Yield rose 13%, demonstrating strong pricing power independent of listing volumes.
Bear Case:
- Stock remains down 11.8% YTD and over 26% below its 52-week high.
- Reported NPAT fell 19% due to A$111 million non-cash India impairment charge.
- Flat listing volume growth and interest rate sensitivity constrain near-term revenue upside.
