Opendoor shares soar on optimism of gains in iBuying after Zillow exit
OpenDoor’s new model is disrupting real estate. OpenDoor buys and sells houses on its platform.
One day later Zillow’s stock fellOpendoor shares rose as high as 19% after a slump of 16 months. Opendoor, a San Francisco-based firm, went public last year via a special purpose acquisitions company. It pioneered instant-buying, or iBuying, which allows homeowners to instantly sell their properties online, instead of going through a lengthy bidding and sales process.
Opendoor plans to release third-quarter earnings next week. This will give investors a better understanding of how they dealt with price volatility which caused Zillow take a loss. massive write-down25% of their staff are laid off, and the organization concludes it cannot justify selling or buying more homes.
Eric Jackson, President of EMJ Capital as well an Opendoor Investor, said Zillow’s abandonment of instant buying was likened to the decision made by many internet companies to discontinue searching two decades earlier. Google’s Most competitive threats
Jackson posted a tweet on Thursday saying that “Z ceding market to OPEN was like Yahoo/Ask Jeeves/Lycos/Excite abandoning search in 2001.” He wrote to CNBC directly, saying that Opendoor’s benefit is about data data data.
Opendoor’s stock gain erased nearly all losses that it had suffered in the previous week when it lost along with Zillow. Though investors believe the market will survive, Zillow, which was founded as an online home-sale marketplace, is inept at running a business in its own right. Opendoor on the other side was specifically created to sell and buy homes.
Opendoor has now been upped for the year at an estimated $15 billion. Zillow, on the other hand, is down from about $50 billion to less than $17 billion.
The expertise of Opendoor was already being praised by analysts before Zillow CEO Rich Barton stated on Tuesday that the company had “been inunable to accurately predict future home prices at different time periods in both directions by much greater than we modelled.”
Zillow paused new purchasesIt blamed a “backlog” of renovations and other capacity limitations for the stock’s drop last month. On the date of the announcement, the stock dropped almost 10%
Instant buying is especially sensitive to labor costs, price swings and supply chain problems. Participants must be able and able to make a profit selling houses after accounting for remodeling and maintenance. Zillow stated that the company’s pricing strategy was ineffective due to rising labor costs and material costs related to the pandemic.
Opendoor gained 3.1% the day Zillow declared its pause. Analysts from BTIG reported that Zillow may have overestimated its inventory, while Opendoor seems to have decreased its purchases.
The analysts at BTIG, which have an equivalent to a stock rating of a “hold”, wrote that OPEN did not accelerate into softer conditions in September. The analysts cited an industry report showing Zillow buying Phoenix property in September and August at a higher price than other companies.
Analysts at JMP sent a Wednesday note to their clients, stating that Zillow was being downgraded even though “we expect iBuying will take share of residential real-estate transactions as the model becomes more mainstream.” Opendoor was named as a smaller competitor. OfferpadAs companies that can benefit.
Offerpad was made public earlier this year through a SPACThe stock rose 5.7% Thursday, but is still at its lowest level since September when it began trading.
CNBC’s closing bell asked Barton Tuesday if Opendoor was making a mistake sticking with iBuying.
Barton stated, “I only can speak for our calculus. I cannot speak for others’ calculus.” He said that Zillow’s move to a less “asset-lite model” is what this move was about.