Opendoor shares soar as investors predict gains in home buying market after Zillow’s exit

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  • Shares of Opendoor jumped on Thursday, as investors look to the home-flipping company to profit from Zillow’s exit from the market.
  • The stock has recovered most of its losses in the week before it was sold with Zillow.
  • Offerpad, a smaller rival of Opendoor, also gained on Thursday.

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With Zillow’s sudden exit from the home-buying market, investors are seeing an opening for Opendoor.

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A day after Zillow’s stock plunged to a 16-month low, Opendoor’s shares soared up to 19%. The San Francisco-based company, which went public late last year through a special-purpose acquisition company, pioneered the instant-buying (or iBuying) market, allowing homeowners to sell their properties online for cash. Received, instead of going through an extended bidding, sales and closing process.

Opendoor is scheduled to report third-quarter earnings next Wednesday, so investors will get a clearer picture of how the company navigated the price volatility that led to Zillow’s massive write-down, a loss for its employees. 25% off, and concluded that it could no longer justify buying and selling the home.

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Eric Jackson, president of EMJ Capital and an Opendoor investor, compared Zillow’s departure from the immediate buyout with the decision by several Internet companies to abandon search two decades ago, eliminating Google’s biggest competitive threats.

“Z handing over the market to OPEN is the equivalent of leaving Yahoo/Ask Jeeves/Lycos/Excite on the hunt in 2001,” Jackson tweeted on Thursday. In a direct message to Businesshala, he said Opendoor’s advantage is all about “data data data.”

Opendoor’s stock rise erased nearly all of its losses earlier in the week, when it sank with Zillow. Investors are betting that the market is viable, but that Zillow, which evolved into an Internet marketplace for home sales, was ineffective in operating a vastly different business. On the other hand, Opendoor was created specifically for home buying and selling.

Opendoor is now ready for the year and is valued at around $15 billion, while Zillow’s market cap has declined from a high of about $50 billion in February to more than $17 billion.

Zillow CEO Rich Barton said Tuesday that some analysts were already touting Opendoor’s expertise that his company “has been unable to accurately predict future home prices at different times in both directions, As much as we do modeling as possible.”

zillow New purchases stopped Last month it was called a “backlog in renovations and operational capacity constraints”. The stock fell nearly 10% on October 18, the day of the announcement.

The immediate buying market is particularly sensitive to price fluctuations, labor costs and supply chain issues because participants must be able to sell the home at a profit after factoring in remodeling and maintenance work. Zillow said rising labor and material costs linked to the pandemic, as well as fluctuating home prices, have rendered the company’s pricing model ineffective.

Opendoor is up 3.1% on the day Zillow announced its halving. Analysts at BTIG wrote in a report that Zillow could “be ahead of itself on inventory,” while Opendoor moderated its activity “by dialing back buyouts.”

Instead of accelerating into softer conditions in September, the open has adjusted, “equivalent to the hold rating on the stock,” BTIG analysts wrote. He pointed to an industry report showing that Zillow lifted its purchases in Phoenix in August and September on rising prices, while others in the industry slowed.

In a note to clients on Wednesday, analysts at JMP downgraded Zillow even though “we expect iBuying to take a share of residential real estate transactions” as the model moves more mainstream. He named Opendoor and smaller rival Offerpad as companies that could have benefited.

Offerpad, which went public this year A SPAC . Through, rose 5.7% on Thursday, though the stock is still down since it began trading in September.

Barton was asked Tuesday by Businesshala’s “Closing Bells” if Opendoor was making a mistake by sticking with iBuying.

Barton said, “I can only speak to my own calculus, I cannot speak to the calculus of others.” “What this move means for us is our calculations are different, zooming back in on the bigger vendor problem,” he said, adding that Zillow is going back to a more “asset-light” model.

Watch: Zillow CEO on Leaving Home-Flipping Business


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