Opendoor Stock Is an Enticing Growth Play After Over 40% YTD Fall

  • This year, Opendoor Technologies (OPEN) stock has fallen sharply because of broader real estate space issues.
  • Rising 30-year mortgage rates are causing housing demand to shrink, which will cause transaction volume to fall.
  • OpenDoor is transforming the real estate market by utilizing a new business model based on modern technologies. It makes it a good long-term buy.
A picture of the OpenDoor (OPEN stock) app on a phone.
Source: PREMIO STOCK/Shutterstock.com

Opendoor (NASDAQ:OPEN), much like the rest of the tech sector, has been having a tough time lately. Shares of the online real estate company have tumbled 42.60% in the year thus far, as a combination of real estate and broader economic issues weigh it down. In addition, what isn’t helping OPEN stock is that the company delivered a worse-than-expected loss in the fourth quarter.

So, is OPEN still a stock to buy? On that front, it’s a resounding yes. Opendoor is a young company trying to bring change and modernization to this industry. iBuyers like Opendoor act like institutional house-flippers: companies that use algorithms to gauge the value of a home and then offer to buy it directly from you. With iBuying, a company can help homeowners sell their homes without ever paying a real estate commission. This saves them both time and money in the process. Although it’s a new idea, the concept quickly caught on.

Hence, Opendoor’s revenues are growing rapidly. The company saw its topline jump by 211% last year and end 2021 with an annual revenue run-rate of more than $15 billion. It operates a data-driven model that has the potential to create a dent in the real estate industry. It also has the potential to lap up the rest of Zillow’s (NASDAQ:ZG) remaining inventory. Plus, after the tech selloff earlier this year, the company is trading at a steep discount to its 52-week high, making it an affordable stock to add to any portfolio.

OPEN Opendoor Technologies $7.51

Why Is OPEN Stock Down?

For several months now, OPEN has been hurting. There are several reasons for this. However, the most prominent has to do with the wider real estate market and the company’s latest earnings report.

Firstly, the supply of houses has been falling sharply over the last five months. According to Zillow, U.S. inventory levels have slumped to about 729,000 listings in February. This is a 25% drop from the same time last year and 48% lower than February 2020.

You also have to factor in the increase in interest rates. The Federal Reserve has recently increased the interest rate to .25% for the first time in the last three years. Thanks to the recent actions of the Federal Reserve, home mortgage rates are spiking. It will eventually result in buyers exiting the market. As a result, volumes will drop.

In addition, Opendoor did not do well in its last earnings report. The company made a $0.31 loss per share on $3.82 billion in the fourth quarter. Opendoor reported a net loss of $662 million last year, more than twice the $253 million loss they wrote in the year-ago period. One of the main reasons for this higher loss is the $536 million stock compensation versus the $38 million recorded in 2020.

OPEN Is Growing Rapidly

Apart from the wider than expected loss, there were many things to cheer for in the company’s fourth-quarter results. OPEN has done well so far and has many competitive advantages that will give it a bright future.

Revenue grew 211% to $8 billion in 2021 as the number of homes sold soared 119% in the same year, to 21,725.

Opendoor for the year posted positive adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) of $58 million, compared to a $98 million loss in 2020.

In addition, Opendoor’s earnings before interest, taxes, depreciation, and amortization (EBITDA) are positive. The figure of $58 million compares very well to a $98 million loss last year.

The company also provided bullish guidance while reporting its fourth-quarter financial results. Opendoor forecasts its revenues within $4.1 billion to $4.3 billion and adjusted EBITDA of between $30 million and $40 million for the first quarter.

Opendoor is also set to extend its presence to 44 markets, including 17 of the top 20 U.S. markets. This means that it will serve a wider audience in the U.S. This is great news, especially with Zillow having left the iBuyer market, creating an opportunity for Opendoor to grab a lot of market share.

Is OPEN Stock a Buy?

Opendoor is changing the industry with its innovative approach. The company lets its customers find homes at the best rates possible. The company is set to shake up and revitalize a fairly traditional real estate industry by relying on new technology.

Although it will face headwinds near-term, the OPEN stock makes sense as a long-term investment.

On the publication date, Faizan Farooque 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 InvestorPlace.com Publishing Guidelines.

Faizan Farooque is a contributing author for InvestorPlace.com and numerous other financial sites. Faizan has several years of experience in analyzing the stock market and was a former data journalist at S&P Global Market Intelligence. His passion is to help the average investor make more informed decisions regarding their portfolio.


Article printed from InvestorPlace Media, https://investorplace.com/2022/04/opendoor-stock-is-an-enticing-growth-play-after-over-40-ytd-fall/.

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