PHOTO: Amazon is the internet retail king
Amazon (NASDAQ:AMZN), of course, is the king of internet retail. But internet retail is a vast opportunity, and in some sectors Amazon isn’t competing at all. For instance, housing and automobiles are two huge sectors of the retail economy, and Amazon simply isn’t a factor. Will the internet radically shift how we buy and sell homes? Of course! But the trick is to figure out which company is going to win this race. Who is going to be the Amazon of real estate?
Maybe it’s Zillow or Opendoor Technologies (NASDAQ:OPEN), the companies leading the iBuyer revolution. Or maybe it’s Redfin, another company that is trying to shift the real estate market online.
But I’m seeing a winner, and it’s none of those companies. The company that’s actually winning by leaps and bounds is eXp World Holdings.
IMAGE SOURCE: GETTY IMAGES.
Don’t believe me? Well, let’s look at some revenue growth rates. If you want to call yourself the “Amazon” of anything, you’d better have massive revenue growth. I expect a high percentage of growth, like what Carvana does in automobiles, or what Sea Limited is doing in Southeast Asia. I’d like to see triple-digit-percentage growth. Here’s what Zillow, Redfin, and eXp World are doing in virtual real estate sales.
| Company | Q3 Revenue (2019) | Q3 Revenue (2020) | Revenue Growth Rate |
|---|---|---|---|
| Zillow (NASDAQ:Z) | $745 million | $657 million | (11%) |
| Redfin (NASDAQ:RDFN) | $239 million | $237 million | (0.7%) |
| eXp World (NASDAQ:EXPI) | $282 million | $564 million | 99.9% |
DATA SOURCE: COMPANY QUARTERLY REPORTS AND YAHOO! FINANCE.
That’s dramatic outperformance. There’s no way I’d buy shares of Zillow — currently valued at $30 billion — when the company’s revenue is going in the wrong direction. I’d much rather own a piece of $7 billion eXp World.
What about Opendoor, the original name in the iBuyer space? Are its sales spiking dramatically? No, they are not. Opendoor recently went public, after a merger with a SPAC late last year. While it hasn’t broken out quarterly numbers yet, its numbers from the first half of the year were also negative. Revenue actually dropped from $2.2 billion to $1.9 billion.
Why is eXp World winning?
One important distinction is the difference in business models. eXp World is not trying to reinvent the wheel. Unlike Zillow and Opendoor, this company does not own any properties.
As a matter of fact, this distinction in the business models can lead to investor confusion. You might think Zillow, with its $745 million in revenue, is much bigger than eXp World. But you’d be wrong. The accounting of Zillow’s revenue numbers includes the value of the houses the company owns and then sells. eXp World’s numbers are based purely on the commissions it makes. eXp World sold over $23 billion worth of houses in the most recent quarter, dwarfing Zillow.
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