Digital And AI Trends Will Transform Real Estate Services

Key Takeaways

• Ongoing investment in AI-driven automation and digital platforms drives efficiency, cost reduction, and scalable margin expansion across Real's core and ancillary businesses.
  
• Virtual, agent-centric model with strong incentives boosts agent recruitment, retention, and productivity, fueling robust sales volume and diversified, growing revenue streams.
  
• Margin pressure, low ancillary growth, stock dilution risk, housing market headwinds, and intensifying competition all threaten long-term profitability and earnings growth prospects.

Catalysts

Operates as a real estate technology company in the United States and Canada.

• Real is uniquely positioned to benefit from the accelerating shift to digital and AI-driven real estate services, as evidenced by its rapid integration of proprietary automation (such as AI-powered transaction processing and the Leo CoPilot assistant) and recent acquisition of Flyhomes' AI-powered platform; this ongoing tech investment should drive higher transaction efficiency, lower operational costs, and support both margin expansion and long-term earnings growth.
  
• The rise of remote/hybrid work and increased agent mobility continue to expand the addressable market for tech-enabled real estate models; Real's virtual, agent-centric platform with no need for physical offices, combined with highly competitive financial incentives, allows for significant ongoing agent recruitment and productivity gains, directly driving sales volume and revenue growth.
  
• The company's focus on developing and scaling ancillary income streams-Real Wallet, One Real Mortgage, and state-level Title JVs-leverages its core agent base to diversify revenue and grows per-transaction profitability, with early evidence of strong adoption and rapid ancillary revenue scaling likely to improve gross margins and support sustained earnings improvement.
  
• Enhanced automation and AI deployment are enabling Real to support record transaction volume growth (up 62% year-over-year) and agent network expansion while reducing per-transaction and per-agent operating costs, pointing to increased operating leverage and the potential for outsized net margin improvements as the business scales.
  
• The combination of above-industry agent productivity growth, low agent churn among high-performers, and platform features (such as Real Wallet's embedded financial products) increases agent retention and lock-in, limiting revenue volatility and providing a foundation for consistent cash flow and future EPS growth.

Real Brokerage Future Earnings and Revenue Growth

Assumptions

• Analysts are assuming Real Brokerage's revenue will grow by 20.3% annually over the next 3 years.
• Analysts assume that profit margins will increase from -0.8% today to 0.9% in 3 years time.
• Analysts expect earnings to reach $26.3 million (and earnings per share of $0.09) by about August 2028, up from $-12.7 million today.
• In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 78.0x on those 2028 earnings, up from -74.3x today. This future PE is greater than the current PE for the US Real Estate industry at 23.9x.
• Analysts expect the number of shares outstanding to grow by 7.0% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 8.2%, as per the Simply Wall St company report.

Real Brokerage Future Earnings Per Share Growth

Risks

• Declining gross margins due to a rising proportion of revenue coming from "capped" high-producing agents-who pay a flat fee per transaction rather than a percentage-could structurally limit long-term margin expansion and reduce net earnings growth, as noted by management's expectation for a continued margin decline year-over-year.
  
• Persistent low attachment rates (currently around 4% for title and 1% for mortgage), with the ancillary businesses making up a small share of revenue and profit, pose a risk that these higher-margin businesses may fail to scale as anticipated, lowering revenue diversification and constraining future profitability.
  
• Ongoing heavy reliance on stock-based compensation ($18 million in Q2), combined with continued use of equity for agent incentives and M&A, risks long-term shareholder dilution and could suppress earnings per share growth, even if headline revenue grows.
  
• Sustained or worsening housing market headwinds-such as volatile interest rates, slowing home sales, and anticipated industry-wide agent attrition-could lead to cyclical declines in transaction volumes, negatively impacting revenues and cash flows, regardless of Real's relative market share gains.
  
• Increased competitive and regulatory pressures, including changes to traditional commission structures, Department of Justice scrutiny, and the potential for further digital disintermediation via fully automated platforms, could threaten both the company's operating model and its ability to maintain premium commissions, resulting in compressed margins and lower long-term earnings.

Valuation

• The analysts have a consensus price target of $6.333 for Real Brokerage based on their expectations of its future earnings growth, profit margins and other risk factors. However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of $7.0, and the most bearish reporting a price target of just $6.0.
  
• In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be $2.8 billion, earnings will come to $26.3 million, and it would be trading on a PE ratio of 78.0x, assuming you use a discount rate of 8.2%.
  
• Given the current share price of $4.5, the analyst price target of $6.33 is 28.9% higher.
  
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.