What happened?
The stock market rebounded sharply on Thursday after opening much lower. As of 3:30 pm EST, the S&P 500 and Nasdaq were firmly in positive territory, while the Dow Jones had recovered to the flatline.
However, certain real estate technology stocks were among the best performers in the market. Pure-play iBuyer Offerpad (OPAD 3.47%) was up by 25% for the day, while rival Opendoor (OPEN -3.64%) wasn't too far behind with an 18% gain of its own.
So what
Offerpad reported its fourth-quarter and year-end earnings on Wednesday afternoon. To put it mildly, they were quite strong.
In the fourth quarter, Offerpad's revenue increased 289% year over year after the company sold almost triple the volume of homes as it did in the fourth quarter of 2020. For the full year, Offerpad bought more than 9,000 homes and sold 6,373 of them, ending the year with a little more than $1 billion in inventory on its balance sheet. That's 156% more homes than the company managed to buy in 2020 -- impressive growth, especially considering existing home inventories are at a record low, and the U.S. real estate market isn't exactly ideal for iBuying.
Image source: Getty Images.
Not only did Offerpad grow impressively but also efficiently and profitably. Offerpad generated strong unit economics, with an $18,400 average contribution profit after interest per home, and generated positive net income for both the fourth quarter and full year.
Looking forward, Offerpad expects to sell 3,000 to 3,150 homes in the first quarter of 2022, which would represent quarter-over-quarter growth of about 27% at the midpoint.
Now what?
To be clear, Opendoor seems to be moving in tandem with Offerpad in anticipation of its own results, which are due after the closing bell. But if Offerpad is a general indicator of how the iBuying industry is performing, the gain could be well justified.
In Offerpad's case, the company has a $1.15 billion market cap and has just started to tap into its addressable market opportunity. So far, it's only in 21 markets and has a 0.9% share of those, so it's fair to say there's plenty of room for the business to scale from here. Offerpad plans to expand into another eight markets in 2022, including some potentially lucrative West Coast markets.
And keep in mind that the current real estate market can be somewhat difficult for iBuyers -- if the real estate market were to normalize in the next year or two, it could be a major growth catalyst for both Offerpad and Opendoor.
If it can continue to expand its geographic footprint, gain a mid-single-digit percent share of its markets, and keep generating positive net income, Offerpad could have a very bright future ahead of it. And it's worth noting that this is an industry where there's room for multiple winners.
