Shares of digital real estate stock Opendoor Technologies (OPEN 3.38%) dropped 23% in January according to data provided by S&P Global Market Intelligence. There wasn't any significant news, but there was plenty of pessimism about the real estate industry.
A better way to buy and sell homes
Opendoor operates an iBuying platform connecting buyers and sellers. It makes quick offers on homes without the need for staging and open houses, which benefits sellers, and it makes the necessary home improvements to have homes ready for resale, which benefits buyers.
It touts its better way to navigate this important purchase, with an artificial intelligence (AI)-powered platform that helps buyers find the right home more easily, a robust suite of tools for sellers, and lower fees. Users can conduct all of their research and negotiations through Opendoor's app, and they can choose to sell directly to Opendoor or list on its marketplace. Real estate has one of the lowest rates of digital penetration at only 1%, and one of the biggest addressable markets, at $1.9 trillion.
While there could be incredible potential here, this has not been Opendoor's time. The real estate market has been massively impacted by high interest rates, which make for higher mortgage rates, and thus increased monthly payments and total house costs. That snowballs into fewer houses on the market even for would-be buyers, since would-be sellers aren't looking to move.
Opendoor acquired 3,136 homes in the 2023 third quarter, an increase from the second quarter, but down from 8,380 last year. Revenue was $980 million, down from $3.4 billion last year. It reported a $49 million adjusted loss of earnings before interest, taxes, depreciation, and amortization (EBITDA), with an adjusted net loss of $75 million and a generally accepted accounting principles (GAAP) net loss of $106 million.
Things could be looking up for Opendoor stock
Opendoor stock had an amazing 2023 despite its problems, ending the year with a 286% gain. At the current price, it's incredibly cheap, trading at only 0.25 times trailing-12-month sales. That's only a bargain, though, if you think Opendoor is going to rebound and start growing.
That is likely to happen at some point, and it will benefit when the Federal Reserve begins its interest rate cuts. This could be a great stock to take a small position in if you're risk tolerant and you have a long time horizon.
