Buy Opendoor Stock If It Dips Again

After ignoring Opendoor Technologies (NASDAQ:OPEN) for much of the year, investors finally noticed the company last week. OPEN stock erased most of the losses that it had posted last summer after it reported its quarterly earnings on Aug. 11.

A picture of the OpenDoor (OPEN) app on a phone.


Opendoor is a leading digital platform for residential real estate.

A Blowout Quarter Boosted OPEN Stock

Opendoor posted GAAP earnings per share of -24 cents for the second quarter, while its revenue topped $1.2 billion. The firm sold 3,481 homes in Q2. CEO Eric Wu said the company’s business momentum benefited from “our relentless focus on the consumer experience, pricing expertise, and operational excellence.” Apparently responding to Opendoor’s modern real estate experience, consumers are flocking to the company’s services.

Opendoor’s business is so strong now that its second-half revenue will meet its 2023 target provided in Dec. 2020.

For Q3, the company forecasts revenue in the range of $1.8 billion- $1.9 billion. It expects its EBITDA will be $15 million-$25 million.

A Strong Moat

Opendoor ‘s structure is well-suited to the real estate market. It operates as a principal, rather than as an agent or a single-home seller. So all of its decisions are based on economics. By analyzing vast amounts of data, Opendoor can effectively maximize its portfolio return, manage its risk, and balance its inventory.

Furthermore, CFO Carrier Wheeler said that the company had maintained healthy sell-through rates in Q2. Moreover, it held its inventory, on average,  for  very short amounts of time.

Opendoor plans to expand into 21 new geographic markets during the rest of this year, after  having  already launched operations in 20 markets earlier in the year. It’s  performing well in the new places in which it’s already initiated operations.

Opendoor does not pay a dividend or have an attractive valuation. Instead, investors are buying the stock for its future growth prospects.

The firm’s brand resonates with customers, and it is persistent when it comes to acquiring customers. Opendoor’s President, Andrew Low Ah Kee said that 35% of its Q2 customer acquisitions had come from consumers who had first engaged with Opendoor towards the beginning of 2021.

Fair Value

Opendoor gets very little attention from Wall Street. Only three analysts cover the stock, and they have an average price target of $21 on the name. The real state services firm trades at valuations that are comparable to those of its peers, as its price-sales ratio is around five times. Zillow (NASDAQ:Z) also trades at the same multiple.

Zillow and Opendoor

Zillow’s valuation is more attractive than that of OPEN stock

Investors seeking a less risky company may consider Zillow instead. The firm scores a 72% on Stock Rover’s  quality scale, as it has generated strong gross margins of around 50% in the last year. By comparison, Opendoor’s gross margin was 13.4% in Q2.

Opendoor’s initiatives, including Opendoor Backed Offers, should lift its margins. In the six months since the latter program was launched, Opendoor reported that its Buy with Opendoor product had reached a $1 billion annual run rate .

Furthermore, the company added Buy With Opendoor for all of its home sellers who are also looking to buy a house. By bundling titles, escrows, and home loans, Opendoor helps customers complete transactions easily and inexpensively.


The housing market depends on consumers’ confidence, which would be undermined. by higher interest rates or a slowing economy. Plus, an economic slowdown would hurt the buying power of Opendoor’s customers.

The Bottom Line

Opendoor exceeded its initial expectations because it underestimated the strength of the demand for its services. What’s more, the firm’s reseller strategy appears to be profitable. As a result, the company’s return on investment is likely to climb,  making the stock more appealing. So investors who are looking for a real estate tech stock to buy may look to purchase Opendoor’s shares instead of Zillow’s stock.

Cautious investors who missed the post-earnings rally may want to wait for OPEN stock to drop. Specifically, the shares may find support at their 20-day and 50-day moving averages, which is in the $15 – $16 range.

Assuming that the real estate market does not weaken, the company could report another blowout quarter that sends its shares back to the $20 – $36 range.

After posting strong Q2 results, Opendoor is well on its way to trending higher in the months ahead.

On the date of publication, Chris Lau did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the Publishing Guidelines.

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