Zillow, Opendoor Can Triple While Disrupting Real Estate Market: Loup Ventures

Loup Ventures recently dove into the real estate market with two companies that could disrupt the sector with their technology.

What Happened: The Loup Ventures team of Gene Munster, Doug Clinton and Will Thompson believe iBuying, or buying homes directly from sellers, will grow over the next several years.

The venture capital firm said this new method “promises a radically simplified solution to this process and a potentially transformational investment area.”

“We believe iBuying will account for 10% of all transactions by 2030,” Loup said. “We believe that shares of Zillow and Opendoor are well positioned to triple over the next five years, as economies improve.”

Younger generations prefer digital solutions optimized for the user experience, Loup said. Millennials and Gen Z account for over 40% of the U.S. population and will be the prime target to buy and sell homes over the next decade.

Zillow, Opendoor Opportunity: The residential real estate market is one of the largest markets virtually untouched by technology, according to Loup Ventures. Each year, around 5.4 million homes are sold generating $1.9 trillion in transactions.

Loup Ventures is investing in both Zillow Group Inc Z and Opendoor Technologies Inc OPEN, the latter of which went public via a SPAC deal last year.

In 2019, 0.5% of homes sold were done as iBuying transactions; Loup believes this share will increase to 10% in 2030. The process seeks to offer a better experience and value and make money off of fees that are lower than normal.

Zillow owns the top of the real estate funnel and can leverage its brand to gain market share from Opendoor in the iBuying market. Zillow had 25% market share of homes bought or sold online in the first nine months of 2020. In five years, Loup thinks Zillow can surpass Opendoor’s market share.

Opendoor is the leader in the iBuying market with a 50% market share in 2020.

Related Link: Ark Next Generation ETF Increases Chamath SPAC Stake, Decreases Zillow

What’s Next: The were over 35,000 online home transactions in 2020. Loup sets an estimate of 550,000 transactions worth $220 billion for the iBuying segment in 2030.

As the market leaders, shares of Zillow and Opendoor could triple according to Loup.

A price target of $470 is set for Zillow with 2026 estimated home sales of 110,000 and revenue of $825 million. Opendoor gets a price target of $80 with 100,000 estimated home sales and EBITDA of $620 million by 2026.

Price Action: Shares of Opendoor surged 14% to $31.10 on Tuesday. Zillow shares were up 3% to $168.72. Both stocks hit new 52-week highs during Tuesday’s trading session.

For more from Loup Ventures, check out Gene Munster's recent interview with Benzinga CEO Jason Raznick.