Opendoor tanks after earnings as CEO thanks new investors for 'increased visibility'
"I want to acknowledge the great deal of interest in Opendoor lately and that we're grateful for it," Wheeler said, even as the stock sank more than 20% after hours. "We appreciate your enthusiasm for what we're building, and we're listening intently to your feedback."
Prior to its recent surge, Opendoor's stock had been mostly abandoned, falling as low as 51 cents in late June. The situation was so dire that the company was considering a reverse split that could lift the price of each share by as much 50 times as a potential way to keep its Nasdaq listing. Opendoor said last week that it's back in compliance and canceled the reverse split proposal.
Opendoor's business is centered around using technology to buy and sell homes, pocketing the gains. The company was founded in 2014 and went public through a special purpose acquisition company (SPAC) during the Covid-era boom of late 2020. But when interest rates began climbing in 2022, higher borrowing costs reduced demand for homes.
Revenue sank by about two-thirds from $15.6 billion in 2022 to $5.2 billion last year.
Much of the stock's bounce in the past six weeks was spurred by hedge fund manager Eric Jackson, who announced in July that his firm had taken a position in Opendoor. Jackson said he believes Opendoor's stock could eventually get to $82. It closed on Tuesday at $2.52, before dropping below $2 in extended trading.
Jackson's bet is that a return to revenue growth and increased market share will lead to profitability, and that investors will start ascribing a reasonable sales multiple to the business.
The turnaround isn't yet showing much evidence of working. For the second quarter, Opendoor reported a revenue increase of about 4% to $1.57 billion. Its net loss narrowed to $29 million, or 4 cents a share, from $92 million, or 13 cents, a year earlier.
In the current quarter, Opendoor is projecting just $800 million to $875 million in revenue, which would represent a decline of at least 36% from a year earlier. Opendoor said it expects to acquire just 1,200 homes in the the third quarter, down from 1,757 in the second quarter and 3,504 in the third quarter of 2024. It's also pulling down marketing spending.
"The housing market has further deteriorated over the course of the last quarter," finance chief Selim Freiha said on Tuesday's earnings call. "Persistently high mortgage rates continue to suppress buyer demand, leading to lower clearance and record new listings."
Wheeler highlighted Opendoor's effort to expand its business beyond so-called iBuying and into more of a referrals business that's less capital intensive. She called it "the most important strategic shift in our history."
Investors, who have been bidding up the stock in waves, were less than enthused with what they heard. But at least there are finally people listening.
"This increased visibility is an opportunity to tell our story to a broader audience," Wheeler said. "We intend to make the most of it."
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