Why Opendoor Technologies Stock Just Dropped
Key Points
Opendoor's Q2 revenue plunged 44% year over year to $883 million.
The company is aggressively rebuilding inventory, purchasing 4,378 homes in Q2.
Despite management's optimism about reaching profitability, Opendoor has never posted a GAAP profit.
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Opendoor Technologies (NASDAQ: OPEN) stock fell 8.5% on Wednesday while the S&P 500 and the Nasdaq Composite were down 0.2% and 0.9%, respectively.
Opendoor, the digital home-buying company, slid following its second-quarter earnings, which landed after Tuesday's close. The report showed revenue and profits well below where they were a year ago.
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Revenue and home sales fell sharply year over year
Revenue for the company's Q2 came in at $883 million, down heavily from $1.57 billion in the same quarter last year, when the company sold 4,299 homes. It sold just 2,339 homes this quarter.
Adjusted earnings before interest taxed depreciation, and amortization (EBITDA) -- a rough measure of operating profitability -- swung to a $4 million loss from a $23 million profit a year ago.
Image source: Getty Images.
New leadership is aggressively rebuilding inventory
This was driven by a decision by the company's previous leadership to buy far fewer homes, leaving Opendoor with fewer homes to sell. It's now taking a different tack. The company bought 4,378 homes in the quarter, up from 1,757 a year ago, and signed 6,908 contracts to buy more, the most since the second quarter of 2022.
Can Opendoor finally turn a profit?
Management expects its recent strategy shift to start bearing fruit soon, with CEO Kaz Nejatian saying the company is "now on a clear path to sustained ANI profitability."
While I do expect the numbers to improve moving forward, I'm skeptical of the company turning an actual GAAP profit, which it's never done. And with the chance of interest rate hikes in the near future, this is not a stock I would own.
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Johnny Rice has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
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