One of the top investing stories of last week was the announcement from Zillow Group Inc. that it is exiting the home buying business. While the news is a negative for Zillow, it could benefit two competitors that went public via SPAC merger.
Zillow announced as part of its third-quarter financial results that it is exiting the home business, Zillow Offers. As a result, the company will sell the more than 7,000 houses it owns and also lay off 25 percent of its workforce.
With Zillow out of the way, Opendoor Technologies and Offerpad Solutions Inc. could benefit with one less competitor on the market. The exit by Zillow could also signal some headwinds and negatives for online home buying and selling by a company, which could be reflected in upcoming earnings from both companies.
Opendoor and Offerpad both report quarterly earnings on Nov. 10 and the Zillow news will likely be a hot topic.
Another topic will be if the companies continue their high growth reported in previous quarters.
Opendoor reported second-quarter revenue of $1.2 billion, up 59 percent year-to-date. The company sold 3,481 homes in the second quarter, up 41 percent year-to-date.
Opendoor was aggressively buying homes in the second quarter with a total of 8,494 homes purchased, up 136 percent from the first quarter.
This could be a big trend to watch with Opendoor’s third quarter: if it bought a growing number of homes or scaled back.
Taken public by a SPAC led by Zillow co-founder and former CEO Spencer Rascoff, Offerpad has launched in 16 markets and is working on expansion to new territories.
The company acquired 3,519 homes and sold 4,281 homes in 2020. Offerpad’s original guidance was to acquire 6,455 homes and sell 5,612 homes in 2021.
In the second quarter, Offerpad announced it acquired a company record 2,025 homes. The company updated its full year guidance to be a range of 5,612 to 6,000 homes sold, up from the time of the SPAC merger announcement.
For Offerpad, a key to earnings could be if the company is progressing in its diversification efforts. The company said it was working on adding services like home improvement advances, extended-stay options, and title and mortgage.
By Chris Katje
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