Could Opendoor technologies be a millionaire share?

Tthere are few industries with as much potential for disruption as real estate. Specifically, the way we buy and sell homes is archaic and Open Door Technologies (NASDAQ: OPEN) believes there is a better way. In this fool live Video clip, recorded on June 15, contributor Matt Frankel, CFP, and Chief Growth Officer Anand Chokkavelu discuss why Opendoor has such a huge opportunity and what needs to happen for investors to achieve big returns.

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Anand Chokkavelu: Opendoor Technologies ticker, OPEN. Opendoor’s strategy is to make the door-to-door sales process easier by completely removing agents. They give sellers an offer on their home and take a 5% to 8% service charge for convenience. Keep in mind that sellers typically pay 5% or 6% brokerage fees, then inspection fees and friction fees, like double mortgage payments, if you are to believe sellers love it. Opendoor has a Net Promoter Score of 70 for the seller, which is pretty darn high. They also offer buy side services. They’re doing it in 27 markets now versus 21, I’m thinking just at the end of 2020 across the United States, so there’s upward growth by increasing that number and entering those markets more. Now their penetration is very low even in their own market, it is because of all the competition. Then you can add all the additional real estate services that a number of these people are trying to do. The pandemic has been severe on Opendoor. Its revenue is less than half of its pre-2019 pandemic sales, but it is now recovering. You can imagine this when you are buying and selling homes. We saw this with say, Zillow (NASDAQ: Z)(NASDAQ: ZG) too, and I think Redfin too, where you kind of want to cut down on buying and selling when there is so much uncertainty. They have a market cap of $ 10 billion, five times the sales with a gross margin of 11%. They love other people, I think they’re all trying to do a process online that was traditionally offline with agents. We have Opendoor ranked eighth. Something to add ?

Matt Frankel: I’m going to go after Anand for a second here because I attacked Jason a minute ago.

Chokkavelu: Awesome.

Frankel: A question I have for Anand, I don’t really take it out on him. You have classified Opendoor and exp (NASDAQ: EXPI) Very strongly. This leads me to believe that you believe in the iBuying business as a long term viability.

Chokkavelu: Well i have classified Red tuna (NASDAQ: RDFN) and Zillow above. I believe more in having an online platform. But then, yeah, I think it’s also more because they’re earlier in their business cycles. I think there are more advantages.

Frankel: My question is, if all three of them can successfully grow their iBuying business, isn’t it so bad for traditional real estate agents like those who work for eXp?

Chokkavelu: Potentially, it depends on whether it comes at the expense of the Keller Williams of the world and the Century 21 of the world.

Frankel: Right. I think it’s fair. I think there would be a lot of consolidation if high volume was another hit and there were a few big guys to come out on top which might actually be good for a company like eXp.

Chokkavelu: Yes, and having that balance scares me a little, but they take healthy gains as long as they make people bad offers. Ditto with like Better (NASDAQ: AURC). If I were a better shareholder, I hope they give you refi rates that are too high than you might have gotten elsewhere for convenience.

Anand Chokkavelu, CFA owns shares of Opendoor Technologies Inc., Redfin, Zillow Group (A shares) and eXp World Holdings. Matthew Frankel, CFP has no position in any of the stocks mentioned. The Motley Fool owns and recommends Opendoor Technologies Inc., Redfin, Zillow Group (A-shares), Zillow Group (C-shares) and eXp World Holdings. The Motley Fool recommends the following options: $ 65 short-term August 2021 sale on Redfin. The Motley Fool has a disclosure policy.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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