Real estate is one of the last sectors to experience technological disruption. But, in recent years, things have started to ramp up. That’s been good news for Exp World Holdings (NASDAQ:EXPI). And, as the trend continues, it’ll continue to bode well for EXPI stock. Many online-based real estate brokerages have made names for themselves in recent years. Yet, this one — though still not the most well-known — is one of the fastest growing names out there.
Sure, investors have caught wind of its potential, given its strong performance over the past twelve months. Yet now, with shares pulling back, its recent weakness may provide a solid long-term entry point.
Why is EXPI pulling back? Things got a little overheated during last month’s market mania for “story stocks.” Now, investors are toning down their enthusiasm. However, that doesn’t mean it’s too late for those who missed out on its previous epic run.
Investor awareness of EXPI stock’s growth potential may be high. But, things are still getting warmed up. Already generating around $1.8 billion in revenue, projections for 2021 and 2022 call for continued above-average growth. With U.S. residential real-estate sales being a trillion-dollar plus industry, this up-and-coming player has much more room to grow. Add in its potential to expand globally and it’s clear the impressive growth is still in early stages.
So, as market enthusiasm cools on this stock, what’s the play? Buy the recent weakness.
EXPI Stock and the Future of Residential Real Estate
EXPI isn’t the only company out there disrupting the traditional realtor business model. There are several emerging players. However, while the competition is high, the total addressable market for this service is so massive that both this company and its rivals could still thrive. That’s even if, individually, each “disruptor” winds up with a small percentage of the overall market.
Put simply, this company has crushed it over the past year. Based on its recent quarterly results, revenue grew a staggering 122% quarter-over-quarter. For full year 2020, sales climbed 84% compared to 2019. Naturally, these impressive numbers played a roll in this stock’s parabolic moves last month.
Since then, shares have fallen considerably, back down to around $55 per share. Some may see this and think the party’s over for this real-estate focused “story stock.” Yet, while things got a little overheated in January and February (when “meme-stock madness” was in full swing), that doesn’t mean the end. Just because investors have dialed down their enthusiasm doesn’t mean things have peaked.
In fact, not by a long shot. Sure, it may be tough for this name to continue growing sales at an 80%-plus clip. But, with extensive room to grow both domestically and internationally, EXPI stock stands to see renewed interest from investors.
Global Expansion May Point to Even Greater Runway
Per sell-side consensus, Exp World’s sales are set to grow by another 55% this year and by about 27% in 2022. These growth numbers may be far below what we’ve seen in recent quarters. But, they’re still solid. Sure, it’s not all about growth. Valuation is an important factor. With its rich multiple, valuation here may look a bit steep. For example, EXPI stock’s current forward price-to-earnings (P/E) ratio stands at 139.47x.
In short, investors may have priced in its growth potential — and then some. But, their confidence may not all that irrational. As it is scaled into a massive enterprise, moving the needle will continue to get tougher. Yet, while the company has rapidly captured a big share of the U.S. residential real-estate market, there’s still much more for it to grab.
Between offering a tech-based platform that’s more appealing to millenials (whose demand is driving the recovery) and having a digital platform that works with real estate agents (instead of “disrupting” them out of business), Exp has the potential to become a dominant player in this space.
And, even if it winds up capturing a commanding share of the U.S. market, there are still plenty of frontiers for EXPI to conquer. Expanding across the globe in developed and emerging markets, there’s many years of potential outsized growth ahead for this real estate powerhouse in the making.
Bottom Line: Pounce on EXPI After Its Recent Weakness
Last month, investor mania may have sent this stock up too far, too fast. But, as shares in the cloud-based real-estate sales platform have sold off, now may be the time to seize the opportunity. Growth may slow down relative to last year’s levels. However, there’s also more of it ahead to justify sending this name back up towards all-time highs.
Yes, the rich valuation may make you hesitant. But with its potential to continue expanding at a record clip, you should definitely take advantage of the recent weakness in EXPI stock.
On the date of publication, neither Matt McCall nor the InvestorPlace Research Staff member primarily responsible for this article held (either directly or indirectly) any positions in the securities mentioned in this article.
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