If you invested $1,000 in Redfin stock five years ago, you'd have this much money today

red fin (RDFN 9.11%) As CEO Glenn Kelman highlighted in the company's latest earnings call, the company spans market sectors in real estate, finance, and technology, including artificial intelligence (AI). As a result, Redfin shareholders will be subject to several industry shifts.

That's all well and good until one or more of these industries comes under extreme pressure. Mr. Kellman can talk about AI until he's blue in the face, but that doesn't cancel out the impact of the Federal Reserve's long-term interest rate policy or the ultra-tight U.S. housing market.

In fact, even Kellman had to admit that the U.S. housing market is less than ideal. Still, after a pandemic-induced stock price rally followed by an even more notable decline, there may be an opportunity to turn the corner for Redfin and its beleaguered investors.

From celebrated to obsolete

It's no exaggeration to say that the world was different than it was five years ago. The pandemic had not yet begun, large-cap stocks were rising on the aftershocks of the corporate tax cut, and Redfin stock was trading at about $18.

Then the pandemic hit a year later, with stock market crashes and rises that few could have predicted. A speculative frenzy took hold on Wall Street, and at one point Redfin stock actually reached the $100 mark. The shareholders had ample opportunity to take their money and run.

The other shoe then slipped in 2021, as a number of macroeconomic factors pushed inflation to a peak of 9.1% in June 2022, and the Fed repeatedly began rapid rate hikes to curb price increases. It fell. Redfin struggled as 30-year mortgage rates soared from the 3% to 4% range to the 6% to 8% range, amid issues affecting both the financial and real estate sectors.

Redfin stock currently trades at about $6.50, down more than 60% from $18 per share five years ago. Therefore, his $1,000 investment five years ago would be worth about $360 today. Amid such difficult circumstances and staggering losses, Mr. Kellman had little choice but to admit that the U.S. housing market was “horrible.”

But perhaps it's a little less frightening now than it has been recently. Mortgage rates have retreated from a peak near 8%, and Redfin reports that the U.S. housing market has increased in value by $2.4 trillion over the past year, reaching $47.5 trillion. That's what it means. This is not a huge year-over-year growth, but it is a start.

Redfin has also provided a glimmer of hope regarding the lingering problem of a lack of housing inventory. The number of new home sales in the U.S. rose 13% from a year earlier in the four weeks ending Feb. 25, the largest increase in nearly three years, the company said.

Is there nowhere else to go but above?

Even for avid bottom fishing enthusiasts, it's hard to defend calling Redfin stock a bargain. The company has no profits, so a price-to-earnings ratio cannot be quoted. And, as anyone who bought Redfin stock for $20 or $10 can attest, just because a stock is falling doesn't necessarily mean it's a bargain.

Indeed, Redfin has survived, if not thrived, amid the housing market woes. Net loss narrowed to $22.9 million in the fourth quarter from $61.9 million a year earlier.

Meanwhile, Redfin expects to incur a net loss of $65 million to $72 million for the current quarter. Losses from marketing expenses alone are expected to total “approximately $25 million,” which would be larger than the company's net loss in the fourth quarter of 2023.

But maybe low expectations could lead to unexpected earnings that aren't as bad as expected, and the “no way out but up” theory could play out for Redfin in 2024. If you're a risk taker who truly believes the Fed will cut interest rates in the near future, Redfin stock has the potential for recovery. There's no guarantee that the next five years won't be worse for shareholders than the last five, so be sure to hedge your bets with proper position sizing.