Markets

Redfin Stock Pops After Announcing $608 Million Acquisition of RentPath

What happened

Shares of real estate technology company Redfin (NASDAQ: RDFN) popped on Friday after the company announced it's acquiring RentPath for $608 million. As of 2:30 p.m. EST, the stock was up 11%.

So what

RentPath owns domains like ApartmentGuide.com and Rentals.com, helping people find rental properties. Redfin serves this part of the real estate market as well. However, Redfin primarily facilitates the buying and selling of homes. By acquiring RentPath, it expands its audience in the important rental market.

A businesswoman draws an upwards arrow over a rising bar chart displayed on a transparent touchscreen.

Image source: Getty Images.

While the deal has been approved by the boards at both Redfin and RentPath, management has yet to disclose how it will be financed. Perhaps it's something the company will address when reporting quarterly earnings next week.

Now what

This was Redfin's biggest acquisition to date. To be sure, considering Redfin's market capitalization is under $10 billion, it's a bold move. Now it will start working on the challenging task of integrating RentPath's operations into its company. It also likely needs to improve the economics of RentPath's business -- RentPath filed for Chapter 11 bankruptcy protection in 2020.

Redfin is scheduled to report fourth-quarter earnings on Feb. 24. The company guided for revenue between $226 million and $233 million, which would be flat to slightly down when compared to the fourth quarter of last year. However, management does expect to have net income of $2 million to $5 million, improving from last year's net loss of $7.8 million.

Redfin stock is up over 200% from this time last year, showing just how high expectations are getting for investors. These heightened expectations highlight how important hitting guidance will be.

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Jon Quast has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Redfin. The Motley Fool has a disclosure policy.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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