Chamath Palihapitiya's Opendoor SPAC deal could unlock the value in other real estate stocks

Published Sun, Sep 20 20206:48 AM EDT

(This story is for CNBC Pro subscribers only.) Chamath Palihapitiya turned heads last week when he unveiled the target company, real estate unicorn Opendoor, for his $4.8 billion SPAC deal. This move will help unlock value in other stocks in the housing space, according to Wall Street analysts. Opendoor is an online marketplace for buying and selling houses, and Palihapitiya's deal value the company at $4.8 billion — nearly equal to its 2019 revenue. The acquisition to take Opendoor public could serve as a positive catalyst for competitor Zillow and homebuilder Lennar specifically, analysts believe. "We think the proposed acquisition of OpenDoor ... sets the stage for Zillow to get more value attribution for the Homes segment of its business," Deutsche Bank analyst Lloyd Walmsley said in a note. Walmsley said the Opendoor deal will likely increase consumer awareness of the online real estate marketplace and ultimately give home sales a boost. The analyst set a buy rating and a 12-month price target on Zillow at $115, which represents a 20% gain from here. "We acknowledge the acquisition could in some respects better capitalize OpenDoor and make an already-fierce competitor stronger, but we ultimately think the positives outweigh the negatives and see this as a meaningful potential catalyst for Zillow shares," Walmsley said. Shares of Zillow have more than doubled this year amid a surge in demand for its virtual home tours in the pandemic. Its home sales and mortgage segments also saw strong improvement. Meanwhile, Lennar, which has a stake in the eye-popping Opendoor deal, could also enjoy a tailwind, according to RBC. The bank upgraded Lennar to outperform from market perform. "Upside remains from unlocking value in ancillary businesses... announced SPAC deal for Opendoor should unveil value of LEN's stake," RBC analyst Mike Dahl said in a note. RBC also said Lennar is well-positioned to protect strong margins against cost inflation. The bank has a $89 price target on Lennar, which would translate into a 12% rally from current levels. Shares of Lennar has gained nearly 50% this year. — CNBC's Michael Bloom contributed reporting.

Chamath Palihapitiya

Olivia Michael | CNBC

(This story is for CNBC Pro subscribers only.)

Chamath Palihapitiya turned heads last week when he unveiled the target company, real estate unicorn Opendoor, for his $4.8 billion SPAC deal. This move will help unlock value in other stocks in the housing space, according to Wall Street analysts.