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Here's Why Opendoor Technologies Stock Sank 16.4% Last Month

By Keith Noonan – Aug 6, 2021 at 9:25AM

Key Points

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Opendoor Technologies stock has slumped 36.7% across 2021's trading.

What happened

Shares of Opendoor Technologies (OPEN -8.44%) dropped 16.4% in July, according to data from S&P Global Market Intelligence. There wasn't much in the way of business-specific news driving the sell-off, but macroeconomic concerns prompted a significant pullback for the company's stock price. 

OPEN Chart

OPEN data by YCharts

While the Nasdaq Composite index closed out the month up roughly 1.2%, these gains were largely powered by large-cap tech names including Apple, Alphabet, and Microsoft. Smaller, growth-dependent tech stocks generally had a tougher time, and Opendoor Technologies stock lost some ground in conjunction with market trends in the month. 

A miniature house on a chart line.

Image source: Getty Images.

So what

July was a month of volatile trading for many small- and mid-cap tech stocks. Concerns related to faster-than-anticipated inflation and a surge of new confirmed coronavirus cases prompted investors to seek out stocks with lower risk profiles. Data released by the U.S. Census Bureau near the end of the month also indicated that the housing boom may have started to wane, with news that sales of newly built homes had dropped in June.

Now what

Opendoor Technologies stock has continued to lose ground early in August's trading. The company's share price is down 2.8% in the month so far. 

OPEN Chart

OPEN data by YCharts

Opendoor Technologies is scheduled to publish its second-quarter results after the market closes on Aug. 11. The company is guiding for sales to come in between $1.025 billion and $1.075 billion, it expects its adjusted earnings before interest, taxes, depreciation, and amortization, or EBITDA, to be between a loss of $5 million and a gain of $5 million. Opendoor has a market capitalization of roughly $8.3 billion and is valued at approximately 1.5 times this year's expected sales. 

For a company that was posting impressive growth prior to the pandemic and is currently demonstrating impressive rebound momentum, that price-to-sales ratio looks pretty low. The kicker is that there's still some doubt about whether the business will be able to shift into delivering consistent profits.

Opendoor's service allows homeowners to quickly and easily sell their properties, and this convenient, digital-focused offering could still have a huge runway for growth. However, profitability has been weak despite the strong housing market, and it's not clear whether the company has a lasting moat. Investors should approach Opendoor with the understanding that the stock has big upside, but it's not necessarily as cheap as it appears at first glance.

Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool's board of directors. Teresa Kersten, an employee of LinkedIn, a Microsoft subsidiary, is a member of The Motley Fool's board of directors. Keith Noonan has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Alphabet (A shares), Alphabet (C shares), Apple, Microsoft, and Opendoor Technologies Inc. The Motley Fool recommends the following options: long March 2023 $120 calls on Apple and short March 2023 $130 calls on Apple. The Motley Fool has a disclosure policy.

Stocks Mentioned

Opendoor Technologies Stock Quote
Opendoor Technologies
OPEN
$1.41 (-8.44%) $0.13
Microsoft Stock Quote
Microsoft
MSFT
$245.12 (-2.03%) $-5.08
Alphabet Stock Quote
Alphabet
GOOGL
$96.98 (-2.51%) $-2.50
Apple Stock Quote
Apple
AAPL
$142.91 (-2.54%) $-3.72
Alphabet Stock Quote
Alphabet
GOOG
$97.31 (-2.56%) $-2.56

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

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