Opendoor Technologies (OPEN +0.68%) is showing some signs of progress in its recovery. The real estate disruptor is starting to buy more homes again, and the new cohort of homes is selling faster. The report included several positive updates, though the company still has a ways to go to demonstrate long-term viability.
There was one metric, though, that stuck out, and it bodes well for Opendoor's future.
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In a company that has been struggling as much as Opendoor, there are many pieces to fix. CEO Kaz Nejatian, who has been at the job for just a few months, has been doing a full gut renovation of the company. It's still in the iBuying business, but it now has a different model focused on increasing volume and buying better homes, instead of finding bargain homes that could take longer to sell.
Since the company has changed its buy-and-sell criteria, the year-over-year comparisons related to how many homes it bought and sold, as well as its revenue, will take time to show progress. However, it's already becoming much more efficient, focusing on artificial intelligence (AI) to drive cost savings, in addition to using it for data-driven decision-making and more.
The cost efficiency is showing up, and the standout number investors need to see is fixed operating costs. They were $33 million in the first quarter, down $3 million from the previous quarter and $6 million from the previous year.
NASDAQ: OPEN
Key Data Points
This is while Opendoor is scaling volume, and if it can contain fixed costs as it continues to buy more homes, it can become profitable very quickly. Net loss narrowed from $63 million last year to $49 million this year in the first quarter, and management expects to become adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA)-profitable on a 12-month go-forward basis starting in the second quarter. It also expects to become adjusted net income profitable, or at least break even, on a 12-month go-forward basis by the end of the year.
There's still a lot of uncertainty, and these are only expectations, so investors should still keep Opendoor on their watch lists.
