EXPI Stock Forecast: Freelance Agents on the rise

Joshua GellerThis EXPI Stock Forecast article was written by Joshua Geller – Financial Analyst intern I Know First.

Highlights

  • eXp World Holdings’ stock is predicted to increase over the next coming month due to changes in the real estate market, clear price action support and a trend reversal indicated by the increase in supply of houses
  • The company’s emphasis on technology and cloud-computing gave it a competitive advantage throughout the pandemic and provides agents the tools to continue selling virtually
  • The housing market’s recent trend of low supply and high prices gives the company’s agent grabbing practices more revenue in the form of commissions (an increase of 116% from 2020)

Overview of EXPI

eXp World Holdings Inc. operates a cloud-based real estate brokerage and is one of the fastest growing in the US by agent count. They specialize in creating a web-based platform that provides users with virtual-3D tours of the properties and is claimed to be their competitive edge in their ability to give residential real estate agents the software to facilitate the selling of properties. Their main focus is on attracting real estate agents and brokers through incentives such as stock-based compensation, low entry fees, flexible working-hours and empowering them to become independent entrepreneurs. eXp Realty, (a wholly owned subsidiary of eXp World Holdings) generates revenue by serving as a licensed broker and receiving commissions in the real-estate transactions. According to the EXPI stock forecast we predict that eXp World Holdings’ stock will increase on all three time frames which are: 1 month, 3 months and 1 year.

Not enough houses to go around and an explosion of agents

Over the past year, eXp Realty has seen a large recruitment of agents and brokers. Their agent base has grown 77% YoY and has exceeded 50,000 agents in Q1 2021. It was only 28,449 a year prior, and these new levels of agents can be attested to the company’s online business model that was highly adaptable to the pandemic. Buyers can tour homes with live video chats to agents, meet in a 3D virtual conference room or cloud campus, secure a mortgage, receive approval from an escrow officer and sell a home all virtually with eXp’s range of products. Resulting in an increase to the company’s closed residential and commercial transaction volume to grow by 123% to $24.5 billion in Q1 2021 compared to Q1 2020.

(Source: greekwire.com)

However this comes to no surprise because of the housing market’s recovery to pre-pandemic levels, “According to the National Association of Realtors (“NAR”) … Current home sales are now at a pre-pandemic level, which is due to a significant increase in demand. The sizable shift to remote work, which has led to current homeowners looking for larger homes and vacation homes, and the continued historic low interest rates have accelerated housing demand.” (EXPI March 31st, 2021 10-Q). This increase in demand has led to the median price of existing U.S. homes to jump starting in Jan 2021 (shown below), causing the supply of homes to drop. The decreasing inventory is reflected on the graph causing the volume of housing contracts to also decrease this year. (The data’s crossover in late March, 21 has no significance because they are plotted on different axes) 

(Data taken from: NAR.com)

The change in U.S. housing prices has gone up by 23.56% between May 2020 – 2021 which is historically staggering and the highest rate in the past 20 years. First-time home buyers are having trouble securing properties because of the high prices, high competition and properties leaving the market at a fast pace. Additionally, the ability to build homes right now is also at an all time low which is due to a lack of skilled builders and high input prices. According to FactSet, the U.S. construction industry will need to add 430,000 new workers in 2021 to keep up with expected demand and as we can see in the graph (pictured below) steel, lumber and copper futures are at all time highs over the past two years. This makes it really difficult to build a small home and these input prices translate into higher contract prices.

(Source: FactSet.com)

In summary, remote work and low interest rates have skyrocketed housing demand causing prices to increase and inventory to decrease and are coupled with the inability to create homes from disruption in construction workers and supply chains. Thus, it is a sellers market right now which puts eXp Realty in a unique position to reap the benefits of easily recruiting new agents and having a large employee workforce to try and sell as many homes as possible. With the extremely high prices it’s simply a quantity game, the more houses they sell the more comissons they can take in on unusually high priced homes. The number of housing transactions and agents for eXp Realty during Q1 2021 has almost doubled since 2020: 37,000 to 73,000 and 28,000 to 50,000 respectively. 

Although the housing transactions for EXPI Realty have increased in the first three months of 2021, the real estate market is becoming bearish within early July. Now that listings of homes have gone up over the course of May and June to match the higher demand, the market is becoming less competitive as it was two months ago. The seasonal change at the end of summer always has stag effects on housing demand and median home prices are still at record highs of $364,430

(Source: Redfin.com)

REIS Market Snapshot

The cooling demand has been seen in the real estate markets. Over the course of a 3-day period: EXPI, RDFN, CBRE, HHC, Z, OPEN have all decreased after a May and June uptrend. Redfin being EXPI’s direct competitor, Z and OPEN (Zillow and Opendoor, respectively), are other iBuying real estate companies, and CBRE and HHC are key players within the real estate market. eXp Realty and Redfin both experienced greater than 10% decreases within this period and can be attributed to the supply/demand changes of more houses coming into the market and buyers becoming deterred because of extremely high house prices. This is predicted to be a pullback after the success a competitive housing market brought to early 2021. 

(Source: Yahoo.com)

(Take note the other colored lines are not share prices but rather percent share price changes)

However, like other cloud-based brokers, eXp Realty’s prevalence might become more dominant in the future. The agent-centric view within the company can be attributed to its growth during the pandemic, because it is easy for agents to sign up as well as work their own hours, which allowed them to handle more transactions coming out of the pandemic. Additionally, the company has plans to expand into international markets including Germany, Japan and Panama during the third quarter of 2021 and already have operations in the United Kingdom (U.K.), Australia, South Africa, Portugal, France, India, Mexico, Puerto Rico, Brazil, Italy, and Hong Kong. For example, “eXp Realty offers a unique financial model for residential and commercial real estate agents. In addition to an attractive commission structure, agents are provided with an opportunity to earn additional income by helping to grow the company’s agent base globally and earn equity in the company through listing and selling activities. eXp’s cloud-based brokerage is powered by Virbela, the company’s immersive and collaborative platform, which enables its agents to communicate, meet and conduct business in a virtual world.”. Thus, the company can provide greater value in the future. 

Supporting this, the company has recently seen positive earnings per share starting in Q2 2020 and has seen the same since. eXp Realty company is growing, in Q1 2021 it doubled its revenues from a year prior but also its expenses, “For the three months ended March 31, 2021 and 2020, gross margin was 9.2% and 10.3%, respectively. Gross margin decreased year-over-year which is mostly attributable to an increase in agent commission costs” (EXPI March 31st, 2021 10-Q). If the company continues the growth of agents it currently does then it will be able to reduce the commission costs, however right now it has to provide a strong incentive for agents to join. This is the most aggressive stock compensation program when compared to its direct competitors of Redfin and Zillow and gives eXp Realty its competitive edge.  

Technical Analysis

EXPI Stock Forecast
(Source: FINVIZ.com)

This is the chart of EXPI over the past year and there is a clear price support at ~$30, previously a price resistance on October 16th, 2020. The stock has been on a downtrend since mid-February where there was high speculation in iBuyer companies and has shown the same behavior as Redfin and Zillow. Now as the price action is seeming to become supported, there is room for the company’s share price to reflect its recent agent growth. 

EXPI Stock Forecast
(Source: Tradingview.com)

The chart of EXPI for the previous two months exhibits a wedge continuation pattern. As the company continues into a downtrend after its February, 16th 2/1 stock split, it has had a period of consolidation between June 8th and July 8th, finally having a breakout on July 12th. The predicted share price of this pattern is a continuation of the yearly downtrend and estimated to come to a price target around or lower than $32.55 (as shown on the graph). This is predicted by the distance between where the wedge trendlines start and is added (in this case subtracted) to the breakout price of $38.00. This price level of ~$31.00 was also an area of support in January and April, indicating a stalemate between buyers and sellers at this price and that it would not likely decrease further. Then the stock will transition into an up-trend after the short term price level in the breakout of the wedge pictured above. 

Conclusion

I recommend that EXPI is a long term buy due to its most recent agent growth, and calming of the post-pandemic housing market boom. Even though the housing market is still highly volatile (relative previous years, this one has seen the highest growth in median home prices in the past 20 years) I believe that EXPI’s price support at $30 however there is no clear price target insight because the company has only seen a year of positive earnings and is having a downtrend reversal. 

The I Know First AI predictive algorithm is also very optimistic on EXPI stock price. EXPI stock has positive signals for all the long-term forecasted horizons from 1 month to 1 year, which serves as an indicator for its potential growth. Moreover, it has a very strong signal of 467.51 for the 1-year forecast, suggesting a strong-buy position.

EXPI Stock Forecast

Past I Know First Success with EXPI Stock Forecast

I Know First has been bullish on pasts EXPI Stock Forecast. Previously, on March 10th, 2021 the I Know First algorithm issued an optimistic forecast for EXPI stock price as a top aggressive stock. Eventually, the company saw a rise in its share price by 21.33% for a 7-day time horizon.

EXPI Stock Forecast
EXPI Stock Forecast

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