The United States housing market delivered a stellar performance in 2021, with home sales on track to reach their highest level in 15 years. According to the Federal Housing Finance Agency, average home prices skyrocketed nearly 20% through the third quarter in 2021, compared to their year-ago figures.
Technology has steadily tapped the real estate market. Since real estate technology or prop-tech went mainstream in 2021, investors have rushed to invest an unprecedented amount of money in the sector. According to a report from the Center for Real Estate Technology & Innovation, venture capital investments in real estate technology companies hit $32 billion in the year, beating the previous annual record.
The IT market in real estate is predicted to reach $13.46 billion by 2026, growing at a 12.2% CAGR. Given this backdrop, Wall Street analysts expect the real estate technology stocks of Opendoor Technologies Inc. (OPEN) and Redfin Corporation (RDFN) to rally by more than 70% in price in the near term.
Opendoor Technologies Inc. (OPEN)
OPEN in Tempe, Ariz., operates as a digital platform for residential real estate services in the United States. The company’s platform enables customers to buy and sell houses online.
On Sept. 23, Access Technology Ventures, a branch of industrial group Access Industries, announced an additional purchase of $300 million of stock in OPEN. Access has supported OPEN since 2015.
For its fiscal third quarter, ended Sept. 30, OPEN’s revenue increased 569.3% year-over-year to $2.27 billion. Its adjusted gross profit rose 606.9% from the prior-year quarter to $233.78 million. And its adjusted EBITDA was $34.51 million, up substantially from its negative year-ago value.
The consensus EPS estimate for the fourth fiscal quarter of 2021 indicates a 59.2% year-over-year increase. And the $3.14 billion consensus revenue estimate for the same quarter reflects a 1,162.2% improvement from the prior-year quarter.
Of the five Wall Street analysts rating OPEN, three have rated it Buy, while two have rated it Hold. The 12-month median price target of $29.75 indicates a 152.1% potential upside. The price targets range from a low of $21.00 to a high of $42.00.
Redfin Corporation (RDFN)
RDFN in Seattle, Wash., is a real estate brokerage company that operates in the United States and Canada. The company’s offerings include an online real estate marketplace that provides real estate services. It also provides title and settlement services.
On Nov. 15, RDFN announced its launch in Big Bear, California, and Ocean City, Maryland, alongside the extension of its brokerage services in Hudson Valley, New York, to include parts of Ulster County. Earlier in November, RDFN announced its launch in the Minneapolis-Saint Paul metro area. This should expand the company’s footprint across the country.
RDFN’s total revenue increased 128% year-over-year to $540.07 million in its fiscal third quarter, ended Sept. 30. This can be attributed to a 38.8% rise in service revenue from the prior-year quarter to $301.66 million. Its gross profit improved 36.8% from the same period prior year to $127.30 million.
Analysts expect RDFN’s revenue to increase 144.5% year-over-year to $597.91 million in the last quarter of 2021.
Three out of the nine Wall Street analysts rating RDFN have rated it Buy. The 12-month median price target of $59.29 indicates a 71.7% potential upside. The price targets range from a low of $27.00 to a high of $88.00.
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OPEN shares were trading at $11.16 per share on Friday afternoon, down $0.64 (-5.42%). Year-to-date, OPEN has declined -23.61%, versus a -1.69% rise in the benchmark S&P 500 index during the same period.
About the Author: Anushka Dutta
Anushka is an analyst whose interest in understanding the impact of broader economic changes on financial markets motivated her to pursue a career in investment research. More...
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