On Friday, Opendoor Technologies(NASDAQ: OPEN) painted a mixed picture in its fourth-quarter earnings report, which triggered a 10.4% decline in its stock value. The company’s disappointing guidance played a pivotal role in the downturn, leaving investors wary of its future trajectory.
Image source: Getty Images.
Challenges in the Housing Market
Opendoor’s revenue plunged by 70% year over year to $870 million, exceeding analysts’ expectations of $826.4 million. The number of homes sold dropped by 69% to 2,364, but the company’s gross margin saw a drastic improvement, rising from 2.5% to 8.3%. Notably, Opendoor trimmed its inventory by 60% to $1.8 billion. Furthermore, the company’s adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) loss shrank from $351 million to $69 million, with a generally accepted accounting principles (GAAP) loss of $91 million, or $0.14 a share, beating the consensus estimate of $0.18.
CEO Carrie Wheeler pointed out that Opendoor exceeded its guidance, witnessing sequential growth in acquisitions in 2023 and building a promising inventory.
Future Prospects in 2024
However, Opendoor’s first-quarter guidance fell short of expectations, which triggered a further plummet in its stock value. The company anticipates a revenue range of $1.05 billion to $1.1 billion, a significant decline from $3.12 billion in the corresponding quarter last year and below the estimated $1.21 billion. It also foresees a contribution profit of $40 million to $50 million and an adjusted EBITDA loss of $70 million to $80 million.
At this juncture, Opendoor’s revenue may not hold as much significance compared to its bottom line, particularly as it generates revenue with every home flip, regardless of profitability. The critical factor lies in the company’s journey toward breaking even. While Opendoor is making strides in that direction, its sequential increase in EBITDA loss for the first quarter may have contributed to the bearish investor sentiment.
Looking ahead, Opendoor’s quest for profitability might require a fillip from improved interest rates and housing market dynamics to materialize.
Should you invest $1,000 in Opendoor Technologies right now?
Before you buy stock in Opendoor Technologies, consider this:
The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Opendoor Technologies wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.
Stock Advisor provides investors with an easy-to-follow blueprint for success, including guidance on building a portfolio, regular updates from analysts, and two new stock picks each month. The Stock Advisor service has more than tripled the return of S&P 500 since 2002*.
See the 10 stocks
*Stock Advisor returns as of February 12, 2024
Jeremy Bowman has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Opendoor Technologies. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
