AI Integration Across Realty Mortgage And Title Will Unlock Powerful Long Term Upside

Catalysts

About reAlpha Tech

reAlpha Tech is building an AI powered, integrated home buying platform that unifies realty, mortgage and title services to make homeownership more accessible and efficient.

What are the underlying business or industry changes driving this perspective?

• Rapidly scaling AI agents such as Claire, the Loan Officer Assistant and the engagement agent are already driving triple digit improvements in engagement, appointments and loan applications. This is positioning the company for structurally higher revenue productivity and better operating margins as volumes grow without a commensurate rise in headcount.
• The strategy to fully integrate Realty, Mortgage, Title and prior AI acquisitions into a single customer centric experience directly addresses the friction and complexity of U.S. home buying. This approach may support higher conversion rates, stronger cross sell revenue per customer and improved net margins through process standardization.
• Focusing expansion on the top 10 residential transaction states, where more than 60 percent of U.S. real estate volume occurs, enables capital efficient growth that can materially accelerate revenue while helping maintain disciplined acquisition costs and healthier earnings over time.
• A debt free balance sheet and recently raised growth capital give the company meaningful runway to execute on both organic scaling and accretive M and A. This may support sustained revenue growth and the potential for expanding earnings as fixed financing costs remain low.
• Rising home prices and elevated interest rates are making traditional paths to homeownership less attainable, increasing demand for solutions that offer rebates and rate buydowns. These solutions can enhance reAlpha Tech revenue growth, support better customer lifetime value and ultimately improve overall profitability.

Assumptions

This narrative explores a more optimistic perspective on reAlpha Tech compared to the consensus, based on a Fair Value that aligns with the bullish cohort of analysts. How have these above catalysts been quantified?

• The bullish analysts are assuming reAlpha Tech's revenue will grow by 92.0% annually over the next 3 years.
• The bullish analysts are not forecasting that reAlpha Tech will become profitable in next 3 years. To represent the Analyst Price Target as a Future PE Valuation we will estimate reAlpha Tech's profit margin will increase from -376.8% to the average US Software industry of 12.4% in 3 years.
• If reAlpha Tech's profit margin were to converge on the industry average, you could expect earnings to reach $3.6 million (and earnings per share of $0.02) by about December 2028, up from $-15.6 million today.
• In order for the above numbers to justify the price target of the more bullish analyst cohort, the company would need to trade at a PE ratio of 142.7x on those 2028 earnings, up from -4.2x today. This future PE is greater than the current PE for the US Software industry at 32.9x.
• The bullish 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 8.48%, as per the Simply Wall St company report.

Risks

What could happen that would invalidate this narrative?

• Persistently high home prices and interest rates could structurally depress first-time homebuyer demand, limiting the addressable customer base for reAlpha Tech's platform and constraining long-term revenue growth and earnings potential.
• The home buying journey remains heavily fragmented by state and even county, and management repeatedly highlights the complexity of syncing Realty, Mortgage and Title across geographies. This raises execution risk that integration will take longer or cost more than planned and weigh on net margins and earnings.
• The strategy depends on rapid geographic expansion and attracting more loan officers and high quality staff. However, regulatory, legal and compliance hurdles for a public, highly regulated financial services business may slow hiring and licensing, delaying scale benefits and keeping operating costs elevated relative to revenue and net margins.
• Larger incumbents such as Rocket, Zillow and Mr. Cooper are moving up and down the real estate value chain with far more capital and brand recognition. This could squeeze reAlpha Tech on pricing and customer acquisition and limit the company's ability to sustain attractive revenue growth and margin expansion.

Valuation

How have all the factors above been brought together to estimate a fair value?

• The assumed bullish price target for reAlpha Tech is $2.6, which represents up to two standard deviations above the consensus price target of $1.73. This valuation is based on what can be assumed as the expectations of reAlpha Tech's future earnings growth, profit margins and other risk factors from analysts on the bullish end of the spectrum.
  
• However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of $2.6, and the most bearish reporting a price target of just $0.6.
  
• In order for you to agree with the more bullish analyst cohort, you'd need to believe that by 2028, revenues will be $29.4 million, earnings will come to $3.6 million, and it would be trading on a PE ratio of 142.7x, assuming you use a discount rate of 8.5%.
  
• Given the current share price of $0.5, the analyst price target of $2.6 is 80.9% 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.