Opendoor Technologies Inc, an eCommerce platform for residential real estate sales, has been downgraded to ‘Perform’ by analysts at Oppenheimer on a slower third-party product offering ramp than previously disclosed.
In a note to clients following the release of Opendoor’s fourth-quarter results, the analysts also wrote that they were removing their price target for the stock.
For 4Q, Opendoor posted revenue of $2.9 billion, down 25% from the year-ago quarter, and a widened net loss of $399 million compared to a net loss of $191 million in 4Q 2021.
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“Overall, we do not see investors supporting the stock until [third-party] becomes the main growth driver of transactions,” the analysts wrote.
“We see OPEN, as a stock trading under $5, as speculative and appropriate only for risk-tolerant investors.”
They also highlighted that the lower-margin second-quarter cohort continued to handicap margins.
“While homes purchases post-2Q22 generated 9.7% contribution margin, they represented just 9% of 4Q revenue and margin will decline as inventory matures,” they wrote.
“With management significantly slowing purchases, we see limited visibility into sales volume after 2Q22 cohort sold off.”
As such, the analysts said they were lowering their FY23E/FY24E financial year revenue estimates by 42% each while reducing their FY23E/FY24E adjusted gross profit forecast to $716 million and $662.
They also reduced their forecast FY23E/FY24E earnings before interest, taxes, depreciation, and amortization (EBITDA) to $451 million and $24 million, while reducing adjusted net income to $548 million and $146 million.
Opendoor shares were down about 8.8% at US$1.46 on Monday afternoon.
Contact the author at emily.jarvie@proactiveinvestors.com
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