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Why Opendoor Technologies Stock Fell 22.7% in May

By Keith Noonan - Updated Jun 4, 2021 at 7:30AM

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Opendoor could be a disruptor in the real estate market, but its shares have taken a beating recently.

What happened

Shares of Opendoor Technologies (OPEN -0.49%) sank 22.7% in May, according to data from S&P Global Market Intelligence. The online real estate stock moved lower after the company published its first-quarter earnings results. 

OPEN Chart

OPEN data by YCharts.

Opendoor published first-quarter results on May 11, and the company saw its share price fall despite posting better-than-expected sales in the period. Sales were $747 million, while the average analyst target guided for revenue of $620 million. However, the company's net loss of roughly $270.4 million and relatively weak gross margins might have scared investors. 

A magnifying glass over a  picture of a house.

Image source: Getty Images.

So what

First-quarter revenue was down roughly 40.5% versus the prior-year period, but it also tripled compared to revenue in the fourth quarter. The year-over-year decline stemmed from the company pulling back on property purchases amid uncertainty created by the pandemic. But activity on that front is picking up again, with total homes purchased increasing 78% on a sequential basis in the first quarter. For the current quarter, Opendoor expects sales to be between $1.025 billion and $1.075 billion, while the average analyst estimate had guided for revenue of $910.11 million.

Despite the recent sell-offs, Opendoor's long-term outlook doesn't appear to have shifted much in the last couple of months. The company's business still looks highly scalable and has big growth potential, but questions remain about whether it will shift into delivering significant profits -- and if so, when. 

Now what

Opendoor Technologies stock has regained some ground early in June's trading, with the share price up roughly 7% in the month so far.

OPEN Chart

OPEN data by YCharts.

The stock is now down roughly 58.5% from the lifetime high that it hit earlier this year, and the company has a market capitalization of roughly $9.4 billion. It is valued at approximately 1.85 times this year's expected sales. 

Opendoor isn't the only player in the online real estate business, but it has a strong position in the market and has been showing strong business momentum despite headwinds related to the pandemic. For investors who are looking to benefit from the growth of online real estate services and aren't deterred by potential for more volatility in the near term, now could be a good time to consider starting or adding to a position in Opendoor. 

Keith Noonan has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Opendoor Technologies Inc. The Motley Fool has a disclosure policy.

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