Residential real estate digital sales platform Opendoor Technologies (NASDAQ:OPEN) stock is turning the corner and staging a comeback after selling off for months. The Company came public via a reverse merger with a special purpose acquisition company (SPAC).
As shares plummeted towards all-time lows, it’s latest earnings release took investors by surprise with 60% top-line growth. The real estate housing boom has been a boon for the Company. The post-pandemic reopening has not stalled or dented the pace of growth for Opendoor. Unlike an eBay (NASDAQ:EBAY) model of connecting home buyers with home sellers and taking a percentage or spread, Opendoor actually purchases the supply from home sellers and sells for a profit to buyers on its platform in a frictionless manner.
The continued strength in the housing market bodes well for an extended runway for the Company. Prudent risk-tolerant investors seeking exposure in the housing boom through a disruptive model can watch for an opportunistic pullback in shares of Opendoor Technologies.
Q2 FY 2021 Earnings Release
On Aug. 11, 2021, Opendoor released its second-quarter fiscal 2021 results for the quarter ending June 2021. The Company reported earnings-per-share (EPS) loss of (-$0.24) beating consensus analyst estimates for a loss of (-$0.34) by $0.10. Revenues grew 60.2% year-over-year (YoY) to $1.19 billion, beating consensus analyst estimates for $1.09 billion.
The Company expanded to 39 markets with 12 new market launches in the quarter. Opendoor purchased homes rose 136% YoY and grew inventory balance to $2.7 billion, up 224% YoY. The company's co-founder and CEO, Eric Wu commented,
“In the second quarter of 2021, we acquired a record 8,494 homes, generated revenue of $1.2 billion, and delivered adjusted EBITDA of $25.6 million, representing growth of 136% in homes acquired, 59% in revenue, and nearly $28 million in adjusted EBITDA compared to the first quarter.
"This strong outperformance is further evidence of the seismic shift in consumer demand towards the modern real estate experience we are pioneering. Based on our current momentum, we are operating today at a second-half revenue run rate that is on track to meet the 2023 target we provided at the time of our December listing.”
Upside Guidance
The Company issued upside fiscal Q3 2021 revenues guidance to come in between $1.8 billion to $1.9 billion versus $1.62 billion consensus analyst estimates. The Company estimates adjusted EBITDA guidance of $15 million to $25 million.
Conference Call Takeaways
CEO Wu set the tone,
“I'm excited to share our outstanding second-quarter results and the significant progress towards our goal of making it possible to buy, sell and move at the tap of a button. As always, the consumer experience is at the center of everything we do here at Opendoor. We recently hit a special milestone of completing our 100,000 customer transaction.”
In one of the most interesting events on a conference call, CEO Wu introduced the Petitto family (100,000th customer) to share their experience selling their home through the Opendoor platform. Jack Petitto stated,
“My experience with Opendoor was a bit easy. I don't know what any other way to describe it. It was just so simple. There was never really any unknowns. Now that helps when I'm taking this venture on and out communicating to my wife, the app is obviously very user-friendly to work with. So, we can both be you know in tune to what every step is along the way. I think it was just the overall transparency, it was just very honest and open communication.
"So, it just made us feel really confident and comfortable moving forward, you know, especially moving forward with our company in a service that was really new and foreign to us, especially with the way in which we purchased our home originally. Everyone I've interacted with so far has been perfect. And I can't say anything more about the great they've done. You really have this type of experience with a brand that makes you kind of have that wow movement. So, you guys have done an incredible job. We really couldn't have been more thankful that this is the route that we went.”
CEO Comments
CEO Wu chimed back in,
“Starting with existing market share growth, we continue to drive all-time highs again in seller offers and true seller conversion across our existing markets. In Q2, we acquired a total of 8,494 homes, the highest in our history by nearly 50%. This record volume was in part driven by our buybox expansion, as we are now able to underwrite the majority of homes in all of our existing markets. We expect this increase in market coverage to play a key role in driving the next phase of our growth.
"We were also observing an increase in awareness of our product offering with direct traffic up 103% since the beginning of this year. This tells us our value proposition is resonating deeply with consumers and more and more home sellers are exploring Opendoor as an alternative to the traditional sale.”
He concluded,
“Lastly, we know that 65% of sellers are also buyers. So we are integrating our products into one bundled experience. We're adding Buy with Opendoor for each of our sellers, also looking to buy and bundling title, escrow and home loans to make the transaction completely seamless and low cost. As we look ahead, we believe that a relentless focus on the consumer experience, developing the most accurate pricing engine and building the lowest-cost platform for our foundation to become the clear digital one-stop-shop for all home buyers and sellers.”
OPEN Opportunistic Pullback Levels
Using the rifle charts on the weekly and daily time frames provides a near-term precision view of the price action playing field for OPEN shares. The weekly rifle chart stalled on its downtrend that started after peaking near the $39.38 Fibonacci (fib) level. The weekly 5-period moving average (MA) flattened at $15.12 as well as the 15-period MA near the $16.02 fib. The weekly stochastic has formed a divergence bottom as it attempts to cross the 20-band up.
The weekly market structure low (MSL) buy triggered above $15.09. The daily market structure high (MSH) sell triggered under $20.90. The daily rifle chart breakout has a rising 5-period MA at $15.98 with 15-period MA support rising at $15.06. The daily upper Bollinger® Band (BBs) sit at $17.53. Prudent investors can watch for opportunistic pullback levels at the $16.68 level, $16.02 fib, $15.44 fib, $15.09 fib, $14.85 fib, $13.93 fib, and the $12.64 fib. The upside trajectories range from the $22.97 fib up towards the $33.92 fib level.