10:42 AM EDT, 09/03/2024 (MT Newswires) -- Redfin (RDFN) is poised for growth amid signs of improving business fundamentals and a potentially favorable macro backdrop from lowered interest rates, B. Riley Securities said in a Tuesday client note.

Structural improvements in the real estate brokerage's core brokerage business, with the launch of its agent compensation plan Next, positions the company for margin stability and transaction growth, according to B. Riley. Commission sharing with real estate agents under the Next program enables Redfin to weather market volatility and deliver "consistent gross margins" across reporting periods and market cycles, the investment company said.

The Next plan is built to attract "high-producing" agents, which helps the company benefit from higher transaction volumes and market share gains, analysts led by Naved Khan wrote in the note. The company posted its first market share gain in two years in the second quarter, prompting senior management to deploy the program across all markets by the end of this year, B. Riley said.

"With interest rates widely expected to come down over the coming months, we expect lower mortgage rates to improve affordability and drive increases in transaction volumes," B. Riley added.

The rising attach rate for ancillary services, such as mortgage and title, are emerging drivers of growth and profitability, the firm said. The addition of rentals has also diversified revenue and put the business in place to generate synergies through cross-listing and organic traffic increase, while reducing certain operational costs, it added.

B. Riley upgraded its rating on Redfin's stock to buy from neutral and raised the price target to $13 from $7.5.

Price: 10.28, Change: +0.94, Percent Change: +10.01