U.S. stock indices surged to new highs last week ahead of a key Federal Reserve meeting, with artificial intelligence-related shares among the leaders. Investors are watching closely for possible signals from the Fed as rate expectations and buy zones for several major stocks come into focus.
The best-performing concepts is SPACs. Considering the different perceptions of the stock, this time TigerPicks chose $Opendoor Technologies Inc(OPEN)$ to have a fundamental highlight to help users understand it better.
$Opendoor Technologies Inc(OPEN)$
Opendoor Technologies Inc. is an e-commerce platform for residential real estate transactions. By leveraging software, data science, product design and operations, the Company is engaged in building a technology platform for residential real estate that offers buyers and sellers a digital, on-demand experience.
Opendoor has been on a monstrous rally over the last few weeks. It seems like the market is buying into the turnaround story, and perhaps with good reason.
With new management, retail enthusiasts and an administration intent on re-igniting the housing market, this could turn out to be one of the best-performing stocks of the year.
The Light At The End Of The Tunnel
The most compelling pillar in the bull case seems to be the company's recent return to positive adjusted EBITDA. In Q2, Opendoor generated $1.6 billion in revenue, achieving its first adjusted EBITDA quarter in three years.
The actual value was $23 million, a significant jump from the $5 million loss in Q2 2024. However, I wouldn't pop a bottle of champagne, as management guided negative EBITDA in Q3, between -$28 million and -$21 million. So, is this concerning?
In my view, not really. Looking at liquidity, the company exited the quarter with $789 million in cash and a total capital of $1.1 billion. As to the net inventory value, the company owns 4,538 homes worth $1.5 billion. As seen below, the number of homes in inventory came down significantly from the highs in 2021, which makes sense, considering the hike in interest rates.
Author's Compilation
Speaking of debt, the company has access to $7.8 billion of nonrecourse borrowing capacity, with $2.0 billion already committed. Additionally, the company extended its debt maturities through the issuance of $325 million in convertible notes due in 2030. This extends $246 million of its existing convertible notes (likely, the term debt facility 2022-S1 in the chart below) by 4 years.
Opendoor
Moving on to the new go-to-market model, the Opendoor platform has doubled the number of customers reaching the final underwritten cash offer, and the listing conversion rate is now 5x higher than the previous flow. Considering the positive results, management plans to roll it out to all the markets this quarter.
Finally, a quick look at valuation shows a very attractive price-to-sales multiple, significantly below the sector median. Furthermore, the net long debt-to-assets ratio is also trading at an attractive multiple when compared to the median of the Real Estate sector.
Seeking Alpha
Three reasons to be bullish on Opendoor.
1) New Management
Opendoor recently brought in fresh leadership focused on cutting expenses and restoring credibility.
Kaz Nejatian is the new CEO. Previously, he served as Chief Operating Officer and VP of Product at Shopify, helping to scale the company.
Opendoor is also bringing back its co-founders, Keith Rabois (as Chairman) and Eric Wu, to its board.
It seems like Netjatian will be the man in charge of leading the strategic pivot toward an AI-powered real estate platform, with an emphasis on cost discipline and product innovation.
2) Housing Emergency
President Donald Trump and Treasury Secretary Scott Bessent have been very vocal about their intentions to support the housing market.
There’s even speculation that Trump could declare a housing emergency, opening the way to fast and targeted policies directed towards the housing market. This could come in the form of tax credits or even direct stimulus.
In any case, this would be a huge tailwind for Opendoor, which has now become the dominant player in the iBuyer space.
The Housing crisis could ironically end up being the best catalyst for Opendoor.
3) Rates Coming Down, Maybe Faster Than Expected
Mortgage rates remain the biggest hurdle to homebuyers, and these could begin to come down fast. Already, the market is pricing in 69 bps of cuts in 2025.
Following the latest employment data, the 10-year has come down, and this should bring down mortgage rates too.
Lower mortgages mean more attractive financing for buyers, which means more real estate transactions, which means more business for Opendoor.
Final Thoughts
Opendoor is the last player in a market that could either be a graveyard or a goldmine.
I have to admit that I missed the momentum run on this stock. My momentum screener shows a very favorable trend, with a sustained increase in the 5-day, 10-day, and 1-month average trading volume
Since the end of June, the share price has been up by over 1,000% for the fortunate few who owned shares. I believe the May 28 Nasdaq delisting overhang is water under the bridge, and the high short interest of 21% of the float makes a short bet on this stock extremely risky, considering the high short squeeze potential.
Stock Price Forecast:
Here are the target price forecasts for the next 12 months from analysts.
Based on 8 Wall Street analysts offering 12 month price targets for Opendoor Technologies in the last 3 months. The average price target is $1.02 with a high forecast of $1.60 and a low forecast of $0.70. The average price target represents a -88.75% change from the last price of $9.07.
Resource:
https://seekingalpha.com/article/4822090-opendoor-dont-let-a-good-crisis-go-to-waste
https://seekingalpha.com/article/4821562-opendoor-not-chasing-the-rally-not-shorting-the-squeeze
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