Opendoor Technologies Inc. (OPEN - Get Rating) operates a digital platform for residential real estate in the United States. Its platform enables consumers to buy and sell homes online.

On August 4, 2022, OPEN and Zillow Group, Inc. (Z) announced their multi-year partnership. This is expected to allow home sellers on the Z platform to request an OPEN offer to sell their homes seamlessly and might boost the companies’ near-term growth.

However, on September 22, 2022, stockholder rights law firm Bragar Eagel & Squire, P.C., announced that it had started investigating potential claims against OPEN on behalf of the company’s stockholders.

Over the past month, the stock has lost 21.5% to close the last trading session at $3.22. It has lost 78% year-to-date and 83.3% over the past year.

Here is what could shape OPEN’s performance in the near term:

Mixed Financials

OPEN’s revenue came in at $4.20 billion for the second quarter that ended June 30, 2022, up 254% year-over-year. However, its total operating expenses came in at $454 million, up 46% year-over-year. Its total liabilities came in at $7.78 billion for the period that ended June 30, 2022, compared to $7.26 billion for the period that ended December 31, 2021.

Negative Profitability Margins

OPEN’s trailing-12-month gross profit margin of 9.68% is 85.9% lower than the industry average of 68.75%. Its trailing-12-month net income margin of negative 1.77% is significantly lower than the industry average of 16.55%.

In addition, its trailing-12-month ROTA, ROTC, and ROCE of negative 2.70%, 0.18%, and 11.48%, compared with the industry averages of 2.35%, 2.18%, and 5.02%, respectively. 

Unfavorable Analyst Expectations

Analysts expect OPEN’s revenue to fall 26.5% year-over-year to $2.81 billion for the quarter ending December 2022. Its EPS is expected to decrease 55.2% year-over-year to a negative $0.45 for the same period. Moreover, its EPS is expected to remain negative in 2022 and 2023.

POWR Ratings Reflect Bleak Prospects

OPEN has an overall F rating, equating to a Strong Sell in our proprietary POWR Rating system. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree. 

OPEN has an F grade for Quality, consistent with its lower-than-industry profit margins.

In addition, it has an F grade for Stability, in sync with its 24-month beta of 2.62.

In the 40-stock Real Estate Services industry, OPEN is ranked #38. The industry is rated F.

Click here for the additional POWR Ratings for OPEN (Growth, Value, Momentum, and Sentiment).

View all the top stocks in the Real Estate Services industry here.

Bottom Line

Amid lingering macro headwinds, OPEN’s bleak profitability is concerning. As analysts expect its top and bottom line to decline in the current quarter, I think OPEN might be best avoided now.

How Does Opendoor Technologies Inc. (OPEN) Stack Up Against its Peers? 

While OPEN has an overall POWR Rating of F, one might consider looking at its industry peers, Hang Lung Properties Limited (HLPPY - Get Rating), Comstock Holding Companies, Inc. (CHCI - Get Rating), and City Developments Limited (CDEVY - Get Rating), which have an overall B (Buy) rating.

OPEN shares were trading at $3.04 per share on Thursday morning, down $0.18 (-5.59%). Year-to-date, OPEN has declined -79.19%, versus a -19.99% rise in the benchmark S&P 500 index during the same period.

About the Author: Riddhima Chakraborty

Riddhima is a financial journalist with a passion for analyzing financial instruments. With a master's degree in economics, she helps investors make informed investment decisions through her insightful commentaries. More...

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