The share price of Opendoor Technologies (OPEN) has been volatile lately.
Opendoor Technologies runs a digital platform for residential real estate in the United States. Consumers can use this platform to buy and sell homes online. Opendoor was founded in 2014 and became public in 2020 after a merger with a special purpose acquisition company (SPAC).
With a market capitalization of $10.6 billion, Opendoor gained 17% in the past five days and 13.6% over the last three months.
On August 11, the company announced its second-quarter earnings results. Following the announcement, the share price rose 24% but again fell 2.4% on Friday, to close at $17.6. (See Opendoor Dividend Date and History on TipRanks)
Source of Opendoor Volatility
The company posted decent second-quarter numbers and gave a positive outlook for the third quarter. However, a recent drop in the stock price could be attributed to concerns about negative cash flow generation and other macro factors.
Let us discuss these vital issues in detail.
Winning Earnings Picture
Though the online residential real-estate firm posted an adjusted loss of $0.24 per share in Q2, it was much lower than the price of $0.34 per share which was anticipated by the Street.
Revenues jumped 60% year-over-year to $1.2 billion and surpassed analysts’ expectations of $1.06 billion.
Further, here are a few key metrics to gauge the company’s market share growth during Q2.
The company sold 3,481 total homes in Q1, up 41% sequentially, while it acquired 8,494 homes, reflecting an increase of 136% sequentially. Further, Opendoor expanded its presence to 39 markets at the end of 2Q21.
This expansion in market coverage, according to management, will likely play a crucial part in propelling the company forward into the next phase of its development.
Strong Q3 Guidance
In addition, the company provided strong revenue projections for Q3.
Management expects Q3 revenues to land between $1.8 billion – $1.9 billion, indicating a 56% increase on a sequential basis. Furthermore, the guidance is significantly better than the $1.52 billion consensus projection.
Risks Remain
Despite these encouraging numbers, there are still certain concerns that investors may have.
First and foremost, the company is currently not profitable. It still generates losses, and may take some time to turn a profit in the near future.
Secondly, the net cash provided by operating activities has been negative $2.3 billion over the past six months, while cash and cash equivalents, as well as marketable securities, were only $1.8 billion at the end of Q2.
The figures indicate that Opendoor might not have enough funds to sustain its operations and expansion plans in the future. This could lead to volatility in the company’s earnings going forward.
Nevertheless, it is important to consider Opendoor’s efforts to expand its operations into new markets and bring in more consumer awareness through greater marketing strategies.
Wall Street’s Take
Following the Q2 results, BTIG analyst Jake Fuller maintained a Hold rating on the stock.
The Wall Street community is cautiously optimistic about the stock, with a Moderate Buy consensus rating based on 1 Buy and 2 Holds. The average OPEN price target of $21.00 implies 19.7% upside potential from the current levels.
Opendoor scores a 8 of 10 from TipRanks’ Smart Score rating system, indicating that the stock has strong potential to outperform market expectations.
Disclaimer: The opinions expressed in this article are solely those of the featured analysts. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.
