Consider buying The Real Brokerage (REAX), as its recent post-earnings stock drop is viewed as an irrational buying opportunity. This asset-light company is a long-term play on the eventual recovery of the real estate market, potentially by May 2026. In contrast, The Trade Desk (TTD) is a name to watch after its significant price drop, but it is not yet a buy at current levels. The business fundamentals for TTD remain strong, and it becomes an attractive purchase if the stock falls another 10-15%. Therefore, investors should consider setting a price alert for TTD while evaluating a position in REAX.

The Real Brokerage (REAX)

• The host is very bullish on REAX, calling its recent earnings report "perfect" and finding the -4% stock drop "shocking."
• The core investment thesis is that REAX is a strong play on the eventual recovery of the real estate market. The host believes that when interest rates eventually drop (potentially by May 2026), the housing market will "pick back up" and REAX will benefit greatly.
• Business Model:
  • Described as "Toast for realtors," it's a technology-driven, national brokerage that disrupts traditional, local brick-and-mortar brokerages.
  • It's an asset-light model, which is a key advantage over companies like Opendoor that were hurt by rising interest rates.
  • The company is successfully growing its agent count, revenue, and transactions even in a very tough real estate market. The host notes, "Bear markets are for building."
• Key Differentiator (Agent Compensation):
  • REAX offers a very attractive 85/15 commission split, where the realtor keeps 85% of their commission. This is much better than the traditional 70/30 split at legacy brokerages.
  • After an agent pays $12,000 in commission splits to the company in a year, they get to keep 100% of their commissions thereafter.
  • This model is designed to attract high-performing, independent realtors.
• Growth & Financials:
  • The company is expanding into higher-margin ancillary services like mortgage (45-50% margin) and title (80% margin) through its app.
  • A weakness mentioned is the low gross margin of 9%.
  • Despite low margins, the company achieves a Rule of 40 score of 53, indicating a healthy balance of growth and profitability.

Takeaways

• The host sees the current stock price as a buying opportunity, viewing the post-earnings drop as an irrational move by market algorithms ("algos") rather than a reflection of poor performance.
• REAX is presented as a long-term investment based on the thesis that the real estate market will eventually recover, and the company is positioning itself to be a primary beneficiary.
• The company's ability to grow and attract top talent during a real estate downturn is a significant sign of strength.

The Trade Desk (TTD)

• The stock experienced a "bloodbath," dropping over 30% post-earnings, which the host believes is an overreaction.
• This is the second time in three quarters that the stock has seen a similar large drop, which was previously followed by a recovery.
• Reasons for the Drop:
  • A rare analyst downgrade from a $130 price target to a price below its current level.
  • The exit of the CFO, which may have triggered automated selling by algorithms concerned about the company's financials.
• Company Strengths:
  • The business is described as a "cash machine" with a very strong EBITDA margin of 40% for the quarter.
  • It is a founder-led business.
  • It has a phenomenal track record, delivering a 46% average annual return over the last nine years, more than doubling the NASDAQ's performance.
• Valuation:
  • Despite the significant drop, the stock is considered "still a little expensive" at its current price of $54.
  • The host believes this premium valuation is justified due to its high quality and historical performance.

Takeaways

• The host is cautiously bullish but is not buying the dip at the current price of $54.
• An actionable entry point is suggested: the host would become interested in buying if the stock were to drop another 10% or 15% from its current level.
• The sharp price decline is seen as being driven by technical factors (analyst downgrade, CFO exit, algorithms) rather than a fundamental breakdown in the business, which remains highly profitable.