Wedbush Applauds Redfin's Partnership With Opendoor; Threatens Zillow's Power

Redfin Corp RDFN has partnered with Opendoor to better compete with Zillow Group Inc Z, according to a new analyst note.

The Analyst And Rating

Wedbush analyst Ygal Arounian maintains an Outperform rating with a $30 price target.

The Thesis

On Thursday, Redfin announced a partnership with Opendoor, allowing home sellers in Phoenix and Atlanta to request an Opendoor iBuyer offer directly through Redfin’s website, where homeowners can request an instant offer as part of their home sale process, Arounian said.

“The partnership will begin in Phoenix and Atlanta initially, where it is already live, and likely expand to more markets if successful,” the analyst wrote in the note. “Redfin will also market Openhdoor’s homes on Redfin.com which should help increase the amount of inventory and traffic coming to the site,” he said.

Arounian said the partnership allows Redfin to dive into the iBuying market more quickly and with significantly less capital and inventory risk. RedfinNow is available in six markets currently, compared to Opendoor with 20.

The analyst said the partnership is a clear positive for Redfin and a clear negative for Zillow.

“While it’s only’ in two markets initially, as Opendoor has expanded across markets rapidly, this could turn into a meaningful partnership rather quickly. It ties together the highest trafficked residential real estate brokerage website with the largest iBuyer, a powerful combination if it fully comes to fruition.”

Although the analyst said there is no way he is writing Zillow off, and it could take some time for the partnership to have a meaningful financial impact for Redfin, it is clearly incrementally beneficial to Redfin.