International Expansion And Tech Partnerships Will Drive Future Success

Key Takeaways

• International expansion and global partnerships aim to enhance revenue growth and market presence, potentially boosting overall financial performance.
  
• Enhanced agent training, luxury market focus, and improved incentive programs seek to increase productivity, retention, and long-term revenue stability.
  
• eXp's international expansion strategy faces geopolitical risks and financial strains, with profitability concerns heightened by competition, NAR settlement, and tech investment execution risks.

Catalysts

Provides cloud-based real estate brokerage services for residential homeowners and homebuyers.

• The continued expansion into international markets, including new country openings in Egypt, Turkey, and Peru, and the development of the global referral platform, are expected to drive significant future growth and increased international revenue, potentially impacting overall revenue positively.
  
• The focus on forming partnerships with best-in-class technology providers, such as Canva and Sisu, aims to improve agent productivity and efficiency, which could lead to enhanced earnings through increased sales volume and transaction count per agent.
  
• Initiatives like the FastCap program, designed to enhance agent training and productivity, are anticipated to boost agent performance and retention, directly influencing revenue growth and potentially improving net margins by reducing churn and enhancing agent success.
  
• The eXp luxury group expansion, which saw significant growth in 2024, presents a potential for higher-margin transactions and increased revenue, especially as luxury sales often carry higher commissions and thus can enhance overall net margins.
  
• The introduction of enhanced agent incentive programs, such as the revised REV Share program and stock equity initiatives, are expected to bolster agent attraction and retention, which should positively impact long-term revenue stability and growth, as well as potentially improve shareholder value through stock performance.

eXp World Holdings Future Earnings and Revenue Growth

Assumptions

• Analysts are assuming eXp World Holdings's revenue will grow by 6.7% annually over the next 3 years.
• Analysts assume that profit margins will increase from -0.4% today to 1.8% in 3 years time.
• Analysts expect earnings to reach $97.5 million (and earnings per share of $0.62) by about May 2028, up from $-16.8 million today. The analysts are largely in agreement about this estimate.
• In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 28.0x on those 2028 earnings, up from -79.0x today. This future PE is greater than the current PE for the US Real Estate industry at 24.2x.
• Analysts expect the number of shares outstanding to decline by 0.46% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 7.43%, as per the Simply Wall St company report.

eXp World Holdings Future Earnings Per Share Growth

Risks

• The reliance on international expansion, although promising, may expose eXp World Holdings to geopolitical risks and challenges specific to each country's market, potentially impacting future revenues if these ventures do not succeed as planned.
  
• The company's strategy of opening up new countries and investing heavily in international markets could strain financial resources and delay profitability in these regions, affecting overall earnings and net margins.
  
• With a net loss reported for 2024 and significant adjustments needed to show profitability, there may be concerns about the company's financial health and ability to generate sustainable net income in a challenging housing market.
  
• As the company invests in a broad array of technologies and partnerships, such as FastCap and AI initiatives, there is execution risk involved if these do not lead to enhanced productivity or sufficient returns on investment, potentially affecting long-term revenue growth.
  
• The highly competitive environment in real estate, coupled with potential regulatory challenges and the NAR settlement implications, may pressure commission structures and operational models, impacting margins and future profitability.

Valuation

• The analysts have a consensus price target of $14.75 for eXp World Holdings based on their expectations of its future earnings growth, profit margins and other risk factors.
  
• In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be $5.6 billion, earnings will come to $97.5 million, and it would be trading on a PE ratio of 28.0x, assuming you use a discount rate of 7.4%.
  
• Given the current share price of $8.72, the analyst price target of $14.75 is 40.9% higher.
  
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.