Real estate technology company Opendoor Technologies (NASDAQ:OPEN) is focused on disrupting the transactional process in the largely untapped U.S. real estate market. The company is concentrating on streamlining the process of buying, selling, and financing properties. It is sitting on a $1.6 trillion addressable market, and, due to Opendoor’s aggressive expansion, OPEN stock is set for significant gains down the road.
Opendoor went public by merging with a SPAC, and it raised over $900 million back in December through the merger. The stock has taken a beating in the past three months, losing 23% of its value.
However, analysts’ average price target indicates that the stock can surge over 70%. Given the array of services that Opendoor provides to its users, the platform has massive, untapped potential. In addition to buying and selling properties, it provides insurance, warranties, maintenance, and other auxiliary services. Therefore, its plan to become a one-stop-shop in the real estate business gives it the edge over its competition, along with a substantial growth runway.
Opendoor’s Expansion
It is imperative for Opendoor to continue to grow its market share, in order to solidify its positioning in the industry. Because its business has low barriers to entry, it needs to continue innovating and expanding to other cities and states.
On its most recent earnings call, the company stated that it intends to enter six new markets in the first quarter of 2021. In all of 2021, it expects to enter 21 new markets, increasing its total to 42. Moreover, it also has 1,800 properties in its inventory at this time. It has its sights set on operating in all of the top 100 markets in the U.S.
The pandemic has bogged down the company, but it expects its growth to accelerate this year. It anticipates that its Q1 revenue will come in at $600 million-$625 million. Opendoor predicts that its Q1 EBITDA loss will be between $33 million and $28 million, but the company’s margins should improve substantially later in the year.
Like other real estate companies, Opendoor seeks to provide the most comprehensive service in the market. It continues to add new services onto its platform, including mortgages, escrow, and most recently, all-cash offers.
Opendoor’s 2020 Earnings
Opendoor recently released its 2020 earnings. It sold 9,913 homes last year, roughly 50% of the 18,799 homes it sold in 2019. The company’s revenue came in at $2.58 billion, down from $4.74 billion in 2019.
But Opendoor was able to reduce its losses in 2020. Last year, it reported net losses of $286.8 million, versus $339.2 million in the previous year. Moreover, the company’s average gross profit per home rose from $16,025 in 2019 to $22,173 in 2020.
Because of the high level of uncertainty in 2020, the company stopped buying homes after the pandemic started and put its efforts into selling its existing inventory. The strategy worked, as the company exceeded its revenue guidance. Further, the platform’s seller conversion rate is surpassing historical highs.
Final Word on OPEN Stock
OPEN stock has been trending poorly lately. However, looking at the larger picture, the company has considerable growth potential. Given the improvements of its markets, its revenue should jump significantly this year. The company’s conversion rates remain impressive, and its expansion to new areas will further boost its market share. The current dip in its price has provided investors with an excellent opportunity to buy the stock at a massive discount.
On the date of publication, Muslim Farooque did not have (either directly or indirectly) any positions in the securities mentioned in this article.
