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1 Growth Stock Down 68% That Wall Street Thinks Could Soar in 2022

By Anthony Di Pizio – Dec 31, 2021 at 5:31AM

Key Points

  • Offerpad is projected to grow revenue at a compound annual rate of 82% by the end of 2022.
  • It's making more gross profit per home sold than competitor Zillow did at its peak.
  • One Wall Street firm predicts a stock-price surge in 2022.

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It poses some risks, but this company is making all the right moves to succeed in a very tough industry.

Let's be clear: Any stock that collapses by 68% from its high carries inherent risks, and that's certainly the case with real estate iBuying company Offerpad Solutions (OPAD 1.38%).

Offerpad buys homes directly from sellers, adds value by renovating them, and then flips them for a profit. It's not an easy business, as Offerpad's largest competitor, Zillow Group (Z -1.52%) (ZG -1.55%) recently proved when it dropped out of the segment after sustaining significant losses.

A smiling couple surrounded by boxes, sitting on a couch cushion on the floor of their new home.

Image source: Getty Images.

But there are bright spots to Offerpad's different approach, and Wall Street firm JMP Securities thinks the stock has what it takes to rise by 84% in the next 12 to 18 months to $12 a share. Here's why.

Being selective is key for Offerpad

Since 2019, Zillow has been on a home-buying binge, purchasing 26,014 houses -- in some cases, multiple-home estates -- with the intention of reselling them quickly for a profit. This strategy is great when real estate prices are rising across the board, but when pockets of the market go soft, it can result in significant losses

Zillow recently listed up to 1,000 of its homes for sale in its five largest markets, 64% of which were reportedly priced below what it paid for them. And in Phoenix, Arizona, up to 93% of its properties are slated to be sold at a loss. In the recent third quarter, Zillow's iBuying segment lost $244 million and erased all of the gross profit the segment had made for the entire year. 

Part of the issue is Zillow's broad geographical footprint. It operates in, and therefore had to carefully track, up to 35 markets across the U.S. Offerpad, on the other hand, operates in 17 markets. Where Zillow's iBuying average gross profit per home peaked at $18,665, Offerpad's average peak (so far) is $31,500 per home in the second quarter of 2021.

It highlights the importance of being selective, because like any asset class, home prices constantly fluctuate, and being on the wrong side can be catastrophic. For Offerpad, now that its largest competitor has moved out of the way, it has an opportunity to grow its market share in the higher-quality markets Zillow has left behind.

A surge in revenue

By the close of 2021, Offerpad expects it will have sold up to 6,000 homes for the year, driving a record revenue result. In the recent third quarter, it actually increased its 2021 revenue guidance by $100 million. But in 2022, analysts expect it will do even better.



2021 (Estimate)

2022 (Projected)



$1.06 billion

$1.90 billion

$3.53 billion


Data source: Offerpad, Yahoo! Finance. CAGR = Compound Annual Growth Rate.

Offerpad's gross profit per home of $22,700 in the third quarter was down from the $31,500 it generated in the second quarter. However, it was still a 48% year-over-year gain and is therefore trending in the right direction. 

The company attributes its success to a combination of its technology and people. Where other iBuying companies rely solely on algorithms to price a home, Offerpad allows technology to do 90% of the work, and it then uses physical intervention by its employees to inspect the home and bring the deal to a close. 

Additionally, it adds value by renovating houses using Offerpad-employed tradespeople, which allows it to achieve higher sale prices compared to simply flipping a property immediately. The company aims to buy, renovate, and sell each home within 100 days. 

The stock is cheap

Offerpad's stock trades at a price-to-sales multiple of just 0.8. By comparison, and despite all of its issues, Zillow's stock trades at a multiple of 2.1 based on estimated 2021 revenue. That means Offerpad's stock would need to double from here just to trade in line with its tech-real estate peer. 

If Offerpad meets analysts' expectations and generates $3.53 billion in revenue next year, its multiple will shrink further to just 0.4 (assuming its stock price remains the same). That makes its recent 68% decline in share price look like an attractive opportunity going into 2022. 

Offerpad is expected to post a loss overall for 2021, but JMP Securities expects it will close out 2021 with a fourth-quarter profit of $0.35 per share. The firm's price target of $12 might even look conservative if Offerpad can turn profitable next year -- it's even possible it could revisit its highs near $20 per share -- but it operates in a tough business, and investors should proceed with cautious optimism. 

Anthony Di Pizio has no position in any of the stocks mentioned. The Motley Fool owns and recommends Offerpad Solutions Inc, Zillow Group (A shares), and Zillow Group (C shares). The Motley Fool has a disclosure policy.

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