eXp World Holdings, Inc. (EXPI) Poised to Pop in Hot Sector on Strength of Next-Gen Real Estate Virtual Cloud Office Platform

With the $130 million (a fraction of the $2 billion sought) settlement between News Corporation’s (NASDAQ: NWS) Move.com and juggernaut real estate/home-related info marketplace developer Zillow (NASDAQ:ZG) (NASDAQ:Z) fresh in the air, investors should be asking themselves how to carve off a slice of the once-again hot real estate sector. REITs have been crushing it since 2000, positing 12 percent returns on average, according to JPM (NYSE: JPM) Asset Management. Zillow, which bought up real estate search engine company Trulia (NYSE: TRLA) recently and which has an exclusive partnership with Yahoo! Real Estate (NASDAQ: YHOO), creating the biggest real estate ad network on the net – was more than happy to pay the still-sizeable sum, and get back to capitalizing on continued sector momentum.

A recent report by IBISWorld (http://dtn.fm/1n1Rx) on the real estate sales and brokerage market forecasts solid revenue growth over the next five years, extending the roughly $122 billion or so in current annual revenues, and enjoying growth that is in-line with the 5.6 percent growth seen over the preceding five years. Residential currently makes up over two-thirds of the space, and it is worth noting that this highly-fragmented sector, characterized by low market share concentration, sees less than one-tenth of overall revenue go to the top four companies, which include residential-focused Realogy (NYSE: RLGY), and commercial-focused CBRE Group (NYSE: CBG).

Many analysts are already saying the Fed will not raise interest rates this month (http://dtn.fm/fB4ml), given the flagging economic data. Even if rates come up, the consensus is that only cosmetic increases are likely to take place. Another key trend here for the real estate sector is that agencies are stacking more in-house brokers on their bench in order to tighten up throughput, ensure deals close fast, and clients get attractive rates. It is also more and more essential to hand-hold through the loan qualification, as difficulty in obtaining mortgage financing ranked number one in the 2016 National Association of REALTORS® (NAR) member profile (http://dtn.fm/o8Fss), meaning really talented and motivated agents/brokers are more important than ever. The NAR data also indicates that 55 percent of realtors are affiliated with an independent company, further highlighting sector fragmentation, and suggesting how dispersed the underlying fabric of movers and shakers is.

Also among the NAR report is an important distinction about the use of social media among members, showing that usage was up five percent, year-over-year, to 70 percent. This single trend alone expresses how important it has become to have a public-facing presence and why Zillow would gladly burn-off $130 million in order to get back to capturing an ever larger chunk of the $12 billion plus annual ad spend from real estate agent listings (http://dtn.fm/K2v0B). Consumers these days have mobile phones with core clocks tens of thousands of times faster than the ones we used to put a man on the moon, and those phones can execute instructions 12 million times faster as well. These people have no time or patience for traditional brick and mortar real estate offices. As a natural result, real estate pros are fleeing the dinosaur model in droves.

With a market cap around $92 million, you might not immediately think of holding company eXp World Holdings (OTCQB: EXPI) as a looming sector disruptor with supernova potential. But a closer look at how this company’s real estate brokerage division, eXp Realty, has streamlined together a virtual collaboration and socialization environment, powered by rich training assets and designed from the ground up as the ultimate agent and broker-empowering cloud office platform – and investors are likely to do a double take. The company’s Agent-Owned Cloud Brokerage™ is not only readily available around-the-clock, it is able to drive new levels of user immersion by providing a 3D environment capability, made possible via a partnership with social virtual platform developer VirBELA. This shared ownership model is extremely attractive to agents and so it is little surprise that eXp Realty saw 84 percent agent growth last year.

A big reduction in agent overhead and the alleviation of cumbersome, antiquated brick and mortar-centric methodologies, combined with huge incentive for agents to bolster troop overall strength in the form of an aggressive revenue sharing program that rewards agents a percentage of gross commissions earned by joining colleagues, create a perfect storm of momentum, the force of which is evident in the company’s record revenue growth for Q1, reported in mid-May. EXPI saw a more than doubling of revenues year-over-year in Q1 to just over $7.12 million for the quarter. And let’s remember, this is after record financial results in 2015, where a 71 percent year-over-year increase in revenues brought the yearly total to $22.87 million.

The future is so bright that EXPI even doubled-down last year in a big way, pushing out into the mortgage origination segment through its 90.5 percent-owned First Cloud Mortgage, which is currently licensed in Arizona, California, New Mexico, and Texas.

For more information, visit the company’s website at http://investors.exprealty.com

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