Proptech stocks analysis: Zillow Group vs Opendoor

Property technology stocks have had a rough ride in the past few years as the industry has faced stiff competition, weak demand because of high interest rates, and a tough regulatory decision that has changed how people buy homes in the US.

Zillow (Z) stock price has dropped by over 41% in the last three years while Opendoor (OPEN), Redfin (RDFN), and Compass (COMP) have crashed by over 85%, 76%, and 63%, respectively. In the same period, the S&P 500 index has jumped by over 25%. This article compares Zillow Group and Opendoor, two of the most popular companies in the industry.

Zillow Group | Z

Zillow Group is the biggest proptech in the United States with a market cap of over $13 billion. Its stock has crashed by over 72% from its highest point in 2021 as the company has gone through major challenges, including its decision to exit its house-flipping business. 

Zillow offers customers a complete suite of products that help customers through their buying or renting lifecycle. Its core products are its eponymous website and app that lets users browse homes available across the country. It also owns similar brands like StreetEasy, Trulia, and Hotpads.

Data by SimilarWeb shows that Zillow had over 374.5 million website visitors in July while Trulia had 39.13 and Streeteasy had 8.3 million. Hotpads had more than 4.7 million users.

Zillow has additional services. Its Premier Agent gives potential buyers an agent as they do transactions while Zillow Home Loans gives customers access to capital. It makes money through customer transactions and advertisements by agents.

Zillow Group’s business has gone through a rough patch as its revenue growth has been volatile. Revenue came in at $2.13 billion in 2021 and then fell to $1.958 billion and $1.945 billion in the next two financial years. It has also made substantial losses in that period.

The most recent financial results showed that Zillow was starting to grow again as its revenue rose by 13% to $572 million, helped by rentals and mortgages. Its net loss also improved to $17 million. 

A key benefit for Zillow is that it has one of the best balance sheets in the industry. It ended last quarter with just $497 million in long-term debt, $1.02 billion in short-term debt, and $2.6 billion in cash, meaning that it can easily pay its debt. Its insiders are also buying the stock.

The other benefit is that, technically, there are signs that the Zillow Group stock has bottomed. On the weekly chart, it has formed an ascending channel pattern and has recently crossed the 50-week moving average. It is also approaching the upper side of this channel. 

In this case, more upside will be confirmed if it clears the resistance point at around $68. If it happens, the next point to watch will be at $80, 40% above the current level.

Opendoor | OPEN

Opendoor is another proptech stock valued at over $1.76 billion. It is a company that lets homeowners sell their homes to Opendoor within a few days or list their homes in its website and apps. The company also launched Opendoor Marketplace to connect home sellers with institutional and retail buyers. 

Opendoor’s business boomed during the pandemic when the real estate industry was booming and interest rates remained low. Its annual revenue moved from $2.58 billion in 2020 and peaked at $15.6 billion in 2022. Last year, the figure came in at $6.9 billion.

Like other proptech companies, it has also made substantial losses over the years as it continued focusing on growth.

Earlier this month, Opendoor said that its revenue rose to $1.5 billion, higher than its previous guidance. 

This revenue growth happened as the company purchased 4,771 homes during the quarter, higher than the 2,680 it bought in the same period in 2023. It ended the quarter with 6,399 homes worth $2.2 billion in its inventory. Opendoor expects that its revenue will be between $1.2 billion and $1.3 billion in Q3. 

The company may benefit if the Federal Reserve starts cutting interest rates in its September meeting. Lower interest rates will lead to lower mortgage rates and a potential uptick for the housing market. Nonetheless, the impact of Fed cuts on the housing market will take time.

Like Zillow, the Opendoor stock price found a strong support since 2023. For months, it has struggled to move below that support level. However, it remains below the 50-week moving average and has also formed a double-top pattern at $4.84. 

Therefore, there is a risk that the stock will resume the downtrend and retest the ascending trendline. In this case, therefore, I believe that Zillow is a better company because of its all-rounded solutions and its superior balance sheet.