Shares of Opendoor Technologies (NASDAQ:OPEN) are flying higher on the day, with OPEN stock up 20%. The move comes after the company issued its second-quarter results and a new multi-year deal with its rival, Zillow (NYSE:Z).
This partnership comes after a bit of a bumpy start to the week. Opendoor was fined $62 million by the Federal Trade Commission (FTC) after claims that the company was misleading customers “into thinking that they could make more money selling their home to Opendoor than on the open market using the traditional sales process.”
Now, after years of competing with each other, Opendoor Technologies and Zillow are coming together to make the process of buying or selling homes easier.
The deal will allow people selling their home on Zillow to request an instant cash offer from Opendoor. From there, the seller can either take the Opendoor offer or combine it with other Zillow offerings, such as financing, closing and agent selection.
From Opendoor President Andrew Low Ah Kee:
“At Opendoor, we’re working to turn what is often viewed as one of life’s most stressful moments — the home move — into an e-commerce experience that’s simple, certain and fast. By bringing together Zillow’s market-leading audience and Opendoor’s e-commerce platform, more consumers will have the option to sell to Opendoor and save themselves the stress and uncertainty of a traditional sale process.”
Zillow is currently valued at roughly $9 billion, while OPEN stock commands a market capitalization of more than $3.9 billion.
Earnings Impact on OPEN Stock
Both Zillow and OPEN stock topped out in the first quarter of 2021. Further, both stocks are down more than 80% since those highs. That’s even as Opendoor is up more than 20% so far on Friday and up more than 32% from its low in May. Notably, the stock never made new lows in June even though the major U.S. indices did.
While shares are rallying on the deal with Zillow, the earnings report was mixed. The company reported $4.2 billion in sales, up 250% year-over-year and just more than expectations by $10 million. However, the company lost 9 cents per share when analysts were expecting a profit of 3 cents per share.
Further, the guidance was truly disappointing. Management expects third-quarter sales of $2.2 billion to $2.6 billion. That’s a far cry from consensus expectations calling for sales of $4.26 billion. When we go through the transcript, management explains:
“Our revenue outlook is for $2.2 billion to $2.6 billion, which reflects expectations for fewer homes sold in the quarter, given a slower resale pace, as well as the impact of a lower acquisition pace that subsequently impacts resale volumes.”
OPEN stock is running into multi-month resistance and the 50-day moving average. However, investors need to remember it’s still down 85% from the highs. If it can clear the $5.80 to $6 area, shares may continue to push higher.
On the date of publication, Bret Kenwell 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.
