Opendoor Technologies (OPEN -24.60%) came into its second-quarter earnings report with a lot of attention after the stock more than tripled in July on a meme-based rally.
Investors who are hoping that the struggling online home-flipper will be the next Carvana, however, were disappointed by the company's second-quarter report. While its results were in line with expectations, the company's third-quarter guidance was much worse than expected.
As of 1:39 p.m. ET, the stock was down 18.8%.
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The housing market is still weak
Opendoor's results have steadily improved as the company has rightsized its business and cut costs to deal with a weak housing market.
In the second quarter, the company sold 4,299 homes, bringing in $1.57 billion in revenue, up 5% from a year ago and beating estimates at $1.5 billion.
It also reported an adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) profit for the first time since 2022 at $23 million, and there are early signs that its strategy of shifting from a product to a platform is starting to pay off. For example, management said that twice as many customers are reaching a final underwritten cash offer than with its traditional direct-to-consumer method.
On a generally accepted accounting principles (GAAP) basis, its loss per share narrowed from $0.13 to $0.04, but that was worse than estimates of a $0.02-per-share loss.
Nonetheless, the company is scaling back its business in the second half of the year as CEO Carrie Wheeler said, "Looking ahead, we believe housing market weakness will persist, and we are not assuming any near-term catalyst for improvement."
What's next for Opendoor
For the third quarter, the company expects revenue to fall nearly 50% sequentially to between $800 million and $875 million, which is well below the consensus at $1.2 billion. It also expects home purchases to slow to just 1,200, and to report an adjusted EBITDA loss of $21 million to $28 million.
While the company's platform pivot could eventually pay off, especially if the housing market cooperates, Opendoor's stock has already been inflated by the meme rally, so it wouldn't be surprising to see shares continue to move lower from here.
