The housing market has been red hot this year, thanks to a number of intersecting catalysts. However, it seems like Zillow (NASDAQ:Z, NASDAQ:ZG) is struggling to handle the heat. Over the weekend, the digital real estate company announced it would pause operations in its automated home-flipping business. That has created an opportunity for competitor Opendoor (NASDAQ:OPEN) and OPEN stock.
So what happened? And what do investors need to know now?
According to the Wall Street Journal, Zillow announced that its automated home-flipping business would not be pursuing new home acquisitions. Although it is unclear how long this pause will last, writer Laura Forman suggests it could extend through the end of 2021.
Zillow’s decision stems from a few factors — primarily, it seems the company has run into issues with the human workers it needs to support computer-driven processes. Forman writes that Zillow is experiencing a shortage in terms of on-the-ground workers and vendors for its home-flipping business.
Rival Opendoor wasted no time in showing that it could hold its own against Zillow. Opendoor announced it was “open for business and continues to scale and grow.” Co-founder Keith Rabois took to Twitter to knock Zillow, saying “Opendoor is doing better than ever” and is “consistently profitable.”
Since then, OPEN stock has experienced heightened trading volume and seen some nice gains. Although shares pulled back on Tuesday, they are up slightly over the past 5-day period and more than 30% for the month.
What Does This Mean for OPEN Stock?
As a quick refresher, Opendoor is a key player in the world of iBuying — companies that use technology to automatically make offers on homes. These firms then handle the marketing and reselling processes.
Zillow, through its home-flipping business, does participate in the iBuying world. However, Opendoor got a head start in this emerging market. That is why the Wall Street Journal suggests that Zillow just blew the door open for Opendoor and its rivals. These companies have not announced any pauses of their own in home acquisitions, making them more attractive right now. However, the Journal also gives investors some reason to proceed with caution: Median home sales prices have finally started to cool.
So how should investors proceed? According to InvestorPlace analyst Luke Lango, the time is now to dive in. In fact, he says:
“Long story short, buying Opendoor stock today could be like buying Amazon (NASDAQ:AMZN) stock back in 1997 – before Amazon took over the retail world. … We see iBuying today as being where e-commerce was in the late 1990s – in the early stages of enormous, disruptive growth.”
Considering that, it seems that OPEN stock is worthy of being on your radar, regardless of any short-term disruptions in the housing world. With Zillow revealing its on-the-ground weakness, Opendoor has some sparkle.