Opendoor Stock: It’s Time to Consider This Undervalued Gem!

Author: Finscreener

Estimated read time: 3 minutes

Publication date: 16th Sep 2021 11:20 GMT+1


While most equity indices are trading close to record highs, there is one growth stock that is flying under the radar. Opendoor Technologies (NASDAQ: DOOR) stock went public in June 2020 and has since gained 55% in market value. However, it’s also down 50% from all-time highs making it a top buy for your growth portfolio right now.

 

An overview of Opendoor stock

Opendoor is a digital platform for residential real estate. The company was founded in 2014 and aimed to reinvest one of the most important transactions of an individual’s life which is the purchase or sale of a home. It has built the entire consumer real estate experience, making buying and selling possible on a mobile device. Opendoor currently operates in several cities in the U.S. and is headquartered in San Francisco.

Opendoor is focused on transforming and simplifying the home buying process which is complex, uncertain, and time-consuming. It has built scalable pricing capabilities, leveraged technology to centralize operations, and provides customers with a suite of digital-first consumer products. These investments have allowed the company to complete over 100,000 transactions and expand its footprints in 41 markets across the U.S.

This company basically provides homeowners that intend to sell their house with cash offers while helping stakeholders navigate the closing process digitally. While a real estate agent generally charges a 6% commission, Opendoor’s fee stands at 5% lowering homeownership costs.

 

Opendoor reports strong Q2 results

In the second quarter of 2021, Opendoor acquired a record 8,494 homes and generated $1.2 billion in sales. It also reported an adjusted EBITDA of $25.6 million. The number of homes acquired rose 136% on a sequential basis while revenue soared 59% compared to Q1 of 2021.

The company’s gross profit grew 64% to $159 million, indicating a margin of 13.4%. Its adjusted net income stood at $2.5 million compared to a loss of $21 million in Q1 of 2021.

Opendoor ended Q2 with an inventory balance of 7,971 homes that represent $2.7 billion in value. Its inventory balance more than tripled compared to Q1 of 2021.

The company explained its business continued to gain momentum in Q2 as offers more than doubled sequentially and real seller conversion stood at record levels. In its shareholder letter, Opendoor stated, “This momentum continues to demonstrate the strong demand for our product experience as consumers gravitate towards more seamless, digital-first solutions. Q2’s acquisition volume was in part driven by the 15% increase in our buybox coverage versus last quarter.”

Opendoor is able to underwrite an additional 15% of its homes in existing markets. Its dynamic pricing platform ingests new data to improve accuracy and expand the breadth of the price points and home types. This in turn allows the company to expand the flywheel by driving brand awareness and increasing customer adoption as well as market efficiency.

 

What next for OPEN stock?

Analysts tracking OPEN stock expect its sales to rise by 157% year over year to $6.65 billion in 2021 and by 80.8% to $12 billion in 2022. This will allow the company to narrow its loss from $2.62 per share in 2020 to $0.87 per share in 2022.

We can see that OPEN stock is valued at a forward price to 2022 sales multiple of 1.2x which is extremely cheap considering its growth rates.


Disclaimer: The writer is an experienced financial consultant who writes for Finscreener.org. The observations he makes are his own and are not intended as investment or trading advice.