Shares of home iBuying company Offerpad Solutions (OPAD -1.64%) fell 43% in January, according to data provided by S&P Global Market Intelligence. There wasn't any bad news, but regular macroeconomic trends continued to roil the stock market, and tech stocks, especially those that are growth stocks, saw the worst of it.
Offerpad is a platform for buying and selling homes online, similar to Opendoor Technologies. It operates through iBuying, or buying and reselling homes.
This industry, typically seen as the modern way to buy a home, came under pressure in November when digital real estate platform Zillow announced that its foray into iBuying was a failure and it would close it down. However, it's not clear that the industry itself was a failure. Zillow might not have been the optimal player in the industry for various reasons, but the industry itself seems to be solid, as demonstrated by the success of Offerpad and Opendoor.
The real estate industry is a $1.9 trillion market, with only 1% of that accounted for digitally. Despite the emergence of digital disruptors in many other areas, Offerpad and similar companies are pioneers in this offline-dominated field. It may be more resistant to digital disruption, but these companies are chipping away at the old mold and making headway.
In the third quarter, Offerpad's revenue increased 190% year over year, and gross profit increased 169%. The number of homes sold more than doubled, to a record 1,673, and 99% of inventory was owned for fewer than 180 days. The company is still posting a net loss, which increased year over year, but it has a clear way forward as it scales.
It's likely that Offerpad, which has a different model than Zillow, can grow and make it work. At least one indication of that in January was a deal with homebuilder Taylor Morrison Home (TMHC 3.30%) to expand a pilot program to create a portal for its homes through the Offerpad platform.
Offerpad stock is down 64% from its first-day closing price last year, and shares are trading at less than $4. It's not easy to value, since it's not likely to post income for the foreseeable future, and it hasn't been public long enough to gauge many trailing-12-month metrics. The market isn't fond of iBuying right now, and it's also not a comfortable place for high-growth tech stocks.
That said, considering its past performance and future opportunities, Offerpad looks like it has a lot of potential. But there's not a lot to go on here, and in the current environment, there's definitely a good amount of risk involved.