Piper Sandler upgrades Redfin buyout by Rocket Mortgage for $12.5 per share

Investing.com -- Piper Sandler upgraded its rating on Redfin Corp (NASDAQ:RDFN) to Neutral from Underweight after Rocket Mortgage (NYSE:RKT) acquisition of Redfin.

The deal values Redfin at $12.50 per share, more than double its Friday closing price prompting the brokerage to raise its price target from $4 to $12.5 matching the deal price.

“We think the transaction is a great deal for RDFN shareholders, which has faced operational challenges around agent capacity and profitability,” analyst said.

All-stock deal valued Redfin at $2.4 billion, including debt, marking a significant shift in the online real estate industry. Piper called the acquisition a strong outcome for Redfin shareholders, given the company’s recent struggles with agent capacity and profitability.

The acquisition, expected to close between the second and third quarters of 2025, is subject to regulatory approval. The process will include an antitrust review and a shareholder vote. Rocket expects the merger to generate $200 million in cost and revenue synergies by 2027, including $140 million in operating cost savings and $60 million in additional revenue.

Redfin’s existing rental partnership with Zillow (NASDAQ:ZG) will remain unaffected by the deal.

Piper Sandler noted that the deal validates Zillow’s strategy of expanding into different areas of real estate services, similar to when Zillow acquired ShowingTime in 2021. While the acquisition strengthens Rocket’s position in the market, the firm sees only a minor competitive threat to Zillow.

The broader real estate sector has been improving, supported by declining mortgage rates and the absence of tariff-related pressures.

Piper Sandler made no changes to its earnings estimates.

Potential risks to the deal include real estate market conditions, economic uncertainty, and competition. However, the firm sees the acquisition as a positive strategic move for both companies.