The Online Home Shopping Platform Built for Real Estate "Insiders" By Luke Lango and the InvestorPlace Research Staff As long-time readers know, we are foaming-at-the-mouth bullish on the online home shopping – or iBuying – process, wherein consumers can buy and sell homes online as efficiently as they buy and sell clothes, electronics, and food online. Long story short, we feel that if a retail shopping process can be virtualized, it will be virtualized, because online shopping offers certain insurmountable convenience, speed, and cost advantages over physical shopping. For years, technology wasn’t good enough to virtualize home shopping. But significant improvements in data connectivity, streaming technology, augmented reality technology, and big data analytics have set the stage for companies to virtualize home shopping in the 2020s. By the end of the decade, we think that more than 1 out of every 5 homes sold in the U.S. will be sold online. Most of the platforms we analyze in this iBuying market are aiming to disintermediate the market by cutting out middle-men (agents) and streamlining, cheapening, and simplifying the process. But they are some who believe that those agents add tremendous value to the home shopping process, by getting sellers top-dollar and getting buyers great deals. Well, for those who do believe that, we’ve found the platform for you. In today’s edition of The Daily 10X, we’re going to tell about this platform, why it’s different than other iBuyers, and how it blends the best of the “old world” and “new world” of home shopping. If real estate agents do hold – and prove – their value in the face of technological disruption over the next decade, then this stock could be due for enormous gains. Company Overview The company we’re talking about is eXp World Holdings (EXPI). EXp World Holdings is a holding company with multiple business segments. But the overwhelming majority of the business is driven by eXp Realty, the company’s cloud-based real estate brokerage. In short, eXp Realty is a real estate brokerage that simply has no offices and is therefore located everywhere, all at once, without any overhead. The virtual brokerage partners with real estate agents all across the U.S. and various other countries to assist them in helping clients buy and sell homes. That is, unlike a traditional iBuyer, eXp Realty does not buy homes directly from sellers, or sell homes directly to buyers. Rather, eXp Realty acts as a virtual brokerage for agents to help home sellers find buyers, and help home buyers find sellers. EXp makes money on a commission-sharing agreement with agents, wherein the agent takes 80% of the commission on every home sale through eXp Realty, and eXp takes the other 20%, up to a $16,000 cap, at which point the agent takes all the commission fees. The bet here is that while home shopping will get partially virtualized, it won’t get entirely virtualized, and real estate agents will forever hold their value in the marketplace. Currently, eXp Realty is partnered with over 60,000 real estate agents across the globe, and has operations in America, Canada, Mexico, the U.K., Australia, France, India, and more. The company drove nearly 240,000 transactions last year for a total volume of $72 billion – of which eXp netted $1.8 billion in revenues. The company is growing very quickly today. Last quarter, the number of agents and brokers on the platform rose 87%, transaction volume rose 210%, and revenues increased 183%. EXp World Holdings currently features a $6.6 billion market cap. The Opportunities - People don’t like the home shopping process. Everyone’s looking for a new solution. But pure “iBuying” may be too much of a departure from the status quo. A virtual brokerage seems like a nice intermediate solution which will attract a wider audience.
- The company doesn’t sit on enormous inventory risk like other iBuyers. Indeed, eXp owns zero homes. The company makes all of its money through commissions, like a traditional brokerage, and therefore, is relatively shieled from a market downturn.
- EXp is growing like wildfire, and nothing screams success like huge growth.
- The management team is a bunch of former real estate insiders who know what they are doing in the real estate market. They should be able to leverage their connections to keep building this business the way realtors want it to be built.
- Agents, realtors, and brokers collectively command a lot of influence in the real estate market. By catering to this demographic, eXp is basically “buddying up” with the power players – while other iBuyers are fighting the power players.
- The 60,000-plus agent pool constitutes a huge competitive moat that will generate enormous network effects over the long haul.
- The balance sheet is clean, with over $100 million in cash and no debt.
The Challenges - Are agents really necessary? Our feeling is that big data analytics can render their market knowledge futile in the long run, and if so, the eXp business model could fail.
- At the end of the day, the home sellers really have all the power in the real estate market. Pure iBuying platforms are catering to the sellers at the expense of the realtors. eXp has flipped that on its head.
- Despite the commission-based model, profit margins are still pretty low. Gross margins aren’t cracking 10%. That detracts from the scalability upside of this model.
How It Could 10X in Value - We estimate about 10 million homes are sold per year in eXp’s target markets.
- Let’s say eXp nabs 15% share. We’re talking 1.5 million transactions.
- At an average price of $550,000, that equates to $825 billion in transaction volume.
- Take rates have hovered around 2.5%, implying $20-plus billion in revenues.
- Net profit margins at scale could hit 15%, for $3-plus billion in net profit.
- A 20X multiple on that imputes a $60 billion long-term valuation possibility for eXp.
Final Word We love the online home shopping world. We’re unconvinced that real estate agents need to stick around in the world. However, if they do, then eXp will turn its virtual real estate brokerage into the biggest platform in the real estate world. And, if that happens, eXp World Holdings stock could absolutely soar like a rocket ship. Sincerely, 
Luke Lango
Editor, The Daily 10X Stock Report Small-cap stocks that can rise 10X over the long run are often volatile. If you are interested in this stock, buy it like a pro by setting strict limit prices. Learn more about how to use limit orders here. | Key Company Details | | Company Name | eXp World Holdings, Inc. | | Ticker Symbol | EXPI | | Yesterday's Close | $44.37 | | Current Market Value | $6.61 Billion | | Annual Revenue | $2.76 Billion | | Catalyst | The iBuying Revolution |
Today's Investor Education Focus: | | | Today's investor is swamped with information, offers, opinions, and different strategies. For someone with a family and a full time job, it can be impossible to sift through all the information out there and find great stock ideas. Fortunately, there's a group of incredible investment minds with long track records of success that will share their top stock ideas with you for free. | Click here to visit The Daily 10X Stock Report Education Center
and access our library of our educational resources
New to The Daily 10X Stock Report?
Click here to access our Quick Start Guide |
Comments
Post a Comment