What happened

The stock market was having another rough day on Friday, with the S&P 500 modestly down and the Nasdaq declining by more than 1.3% as of 11 a.m. EST. However, Opendoor Technologies (OPEN 0.47%) was having a particularly awful day, with shares down by 23% to their lowest level since November.

So what

There are two reasons why the real estate technology company is having such a rough day. For one thing, high-growth tech stocks have been having a terrible week, and Friday is no exception. In fact, the stock is down nearly 40% since Monday, so this is just adding to recent declines.

House with sold sign in front yard.

Image source: Getty Images.

However, the biggest reason for today's particular decline is Opendoor's fourth-quarter earnings report, which was released on Thursday afternoon. To say investors aren't thrilled with the results would be an understatement.

The key problem is that the COVID-19 pandemic affected Opendoor's iBuying business far more than investors had been expecting. The company paused homebuying at the start of the pandemic and sold down most of its existing inventory in the second and third quarters. We already knew all of that.

What investors were surprised to see was just how big the effect was. In the fourth quarter, Opendoor sold 849 homes, a staggering 83% year-over-year decline. Revenue declined by 80% during the period as well.

Now what

To be sure, the news isn't all bad. Opendoor ended 2020 with nearly $1.5 billion in cash and recently raised another $860 million in an equity offering, so it has tons of growth capital. And the company anticipates doubling its geographic footprint to 42 markets in 2021. In addition, Opendoor's gross margin improved to 8.5% for 2020 from 6.4% in 2019, which is certainly an encouraging sign for future potential.

However, until the company can really build its inventory back up, revenue is likely to remain somewhat depressed. Opendoor's revenue in the average quarter in 2019 was nearly $1.2 billion and the high end of first-quarter 2021 guidance is for $625 million, so it's not difficult to see why investors might be concerned.