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52-week low: Broker says the REA (ASX:REA) share price has 30% upside

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The REA Group Limited (ASX: REA) share price is falling again with the market on Tuesday.

In morning trade, the property listings company’s shares are down 2.5% to a new 52-week low of $124.51.

Is the REA share price weakness a buying opportunity?

While the weakness in the REA share price in 2022 has been disappointing, it could be a buying opportunity for investors.

According to a recent note out of Goldman Sachs, its analysts have a buy rating and $167.00 price target on the company’s shares.

Based on the current REA share price, this implies potential upside of 34% for investors over the next 12 months.

Why is the broker positive on REA?

Goldman Sachs was pleased with the company’s performance during the first half of FY 2022.

It commented: “REA also delivered strong 1H22 earnings growth which was broadly in-line with our expectations, but was weaker in the core Australia business. With a strong start to 2H (i.e. listings +14% in Jan), and continued pricing/depth residential tailwinds, we expect solid 2H momentum.”

And while the broker suspects that investors may have concerns over REA’s ability to build on this next year, its analysts continue to forecast earnings growth in FY 2023.

Goldman explained: “We believe investor focus will now be on the outlook into FY23, given slowing price/depth contributions and a very tough listings comparable. We forecast FY23 EBITDA growth of +7%, assuming (1) -5% listings headwinds (-7% adj. for non-repeat of Fed Election) offset by +6% price and +3% depth/new products (such as Audience Max/Connect) (2) Improving trends in Commercial/Developer given strong expected project commencements; (3) Continued growth at Hometrack; (4) Improved MOC earnings; and (5) International momentum, particularly with smaller India losses.”

Goldman is forecasting EBITDA of $682 million in FY 2022, then $729 million in FY 2023 and $818 million in FY 2024.

Based on these forecasts, the broker clearly believes the REA share price is good value at the current level.

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