What Happened?

Shares of technology real estate company Opendoor (NASDAQ:OPEN) fell 4.2% in the afternoon session after the company reported weaker third-quarter earnings, and provided revenue guidance for the next quarter that fell short of analysts' forecasts. This cautious outlook was influenced by a challenging operating environment, marked by high mortgage rates and affordability issues that are dampening transaction growth. 

On the other hand, revenue, EBITDA, and EPS surpassed analysts' expectations. Overall, this was a mixed quarter, highlighting potential headwinds in the near term.

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What The Market Is Telling Us

Opendoor’s shares are extremely volatile and have had 80 moves greater than 5% over the last year. In that context, today’s move indicates the market considers this news meaningful but not something that would fundamentally change its perception of the business. 

The biggest move we wrote about over the last year was 6 months ago when the stock gained 25.2% on the news that the company reported first-quarter results that beat analysts' revenue and adjusted EBITDA expectations, with the latter beating by a convincing amount. 

The top line benefited from strong acquisition volumes as Opendoor acquired 3,458 homes in Q1 (up 98% versus Q1'2023). The momentum is expected to extend to Q2, given seasonality tailwinds, which should result in home purchases of over 4,500 homes. 

While its revenue guidance for the next quarter was underwhelming, adjusted EBITDA guidance for the period was well above. Overall, we think this was a really good quarter that should please shareholders.

Opendoor is down 57.2% since the beginning of the year, and at $1.84 per share, it is trading 61% below its 52-week high of $4.72 from December 2023. Investors who bought $1,000 worth of Opendoor’s shares at the IPO in June 2020 would now be looking at an investment worth $169.38.

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