Forget Evergrande and Invest in These Real Estate Stocks Instead!
September 24 2021 - 10:33AM
Finscreener.org
Equity markets experienced a
pullback on Monday after it was revealed that China-based real
estate giant Evergrande (OTC:
EGRNY) has precarious financials. Several indices including the
S&P 500 lost over 2.5% as Evergrande failed to pay $80
million in interests that were due on September
20.
There is a good chance for the
company to miss another bond payment due this week and it’s quite
evident that Evergrande is staring down the barrel given it carries
$300 billion in debt on its balance sheet.
This may severely impact China’s
real estate and financial services market and the after-shocks may
be felt all over the world.
While investing in
capital-intensive companies such as Evergrande carries significant
risks, it makes sense to buy stocks that are
disrupting the real estate
space. Here, we look at
three stocks that should be on the radar of real estate investors
right now.
Offerpad Solutions
A company valued at a market cap
of $3 billion, Offerpad Solutions (NYSE:
OPAD) purchases, sells, rents and renovates properties in the
U.S. It offers iBuying, a real estate solutions platform that
enhances the home selling experience for homeowners.
Offerpad is forecast to increase
its sales from $856 million in 2018 to $1.78 billion in 2021,
indicating an annual growth rate of 28%. It sold close to 4,300
homes last year and expects this figure to rise close to 6,000 in
2021. However, the company has managed to increase its revenue
generated per home to $31,500 in Q2 of 2021, up from $1,400 in the
year-ago period.
A low-interest rate environment
spurred housing demand which in turn led to higher prices. While
Offerpad has managed to benefit from favorable market conditions,
the company is expanding at a stellar pace and is poised to gain
from economies of scale going ahead.
Offerpad stock is down 30% from
all-time highs and is a top bet for contrarian and growth
investors.
Redfin
Similar to Offerpad, Redfin
(NASDAQ:
RDFN) is also operating a
direct-buying platform and attracts potential homeowners with a low
listing fee that stands at 1%. The company claims to have saved
over a billion dollars in listing fees since its
inception.
Redfin accounted for 0.81% of
total homes sold in the U.S. and this figure rose to 1.18% at the
end of Q2. It sold 583 homes in the last 12-months via direct
buying. However, in Q2 this figure stood at 292, indicating a
year-over-year rise of 80%.
Redfin has increased its sales
from $370 million in 2017 to $886 million in 2020. Analysts expect
sales to more than double to $1.78 billion this year and increase
by 31% to $2.34 billion in 2022.
In the second quarter of 2021,
the company increased sales by 121% year over year while gross
profits soared by 174%.
Zillow
The final stock on my list is
Zillow Group (NASDAQ: Z)
which is currently valued at a market cap of $24.3 billion. Zillow
is projected to grow its sales from $1.33 billion in 2018 to $6.6 billion in
2021, indicating an annual growth rate of 70%. Its top-line growth
is driven by the company’s expanding suite of solutions that
includes nine brands such as Premier Agent, Zillow Closing and
Zillow Home Loans.
While Zillow Closing provides
title and escrow services, Premier Agent is a SaaS-based broker
platform and Zillow Home Loans provides in-house mortgage services.
While the first two companies are still reporting an adjusted loss,
Zillow is forecast to increase earnings from $0.44 in 2020 to $1.17
this year.
Analysts expect Zillow stock to
touch $165 in the next 12-months which is almost 70% higher than
its current trading price.
Offerpad Solutions (NYSE:OPAD)
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