Fathom Holdings Inc.: A Compelling Buy Amidst Market Undervaluation and Growth Potential

Roth MKM analyst Darren Aftahi maintained a Buy rating on Fathom Holdings (FTHM – Research Report) today and set a price target of $4.50.

Darren Aftahi has given his Buy rating due to a combination of factors including Fathom Holdings Inc.’s current valuation at a significant discount to its peers and the potential for improvement in key business areas. Aftahi notes that Fathom Holdings trades at approximately 1x FY24 gross profit, which is markedly lower than the median of its peers at around 4x. This undervaluation, coupled with an anticipated uptick in joint ventures and agent growth, particularly as the housing market enters a seasonally strong period, presents an opportunity for the stock to narrow the valuation gap with its competitors.
Aftahi also points out the strategic moves Fathom Holdings is making, such as expanding its ancillary services, which have already shown promise in Texas with a 16% increase in title file starts in early 2024. The expectation is that continued success in these services can lead to profitability on an adjusted EBITDA basis in the first quarter of 2024. Moreover, there is potential for agent growth to reaccelerate in the first half of the year, which would further enhance the company’s stock value. The broader housing market’s improving trends, including an increase in inventory and sales, underpin Aftahi’s optimism that the company can capitalize on these developments, driving both multiple expansion and margin growth.

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Fathom Holdings (FTHM) Company Description:

Fathom Holdings Inc is a cloud-based, technology driven, full-service real estate brokerage company. The company primarily operates in the United States residential real estate industry.