Opendoor Technologies Inc (NASDAQ:OPEN) wants to make housing more accessible. It has revolutionized home buying and selling with a mobile-first approach, creating an easier way to make one of life's biggest decisions.
The company’s strength lies in its relentless focus on the consumer experience, pricing expertise, and operational excellence. Driven by its goal of providing consumers with unparalleled buying experiences, Opendoor’s values are reflected in its commitment to developing scalable pricing capabilities that can reduce costs.
In the second quarter of Fiscal Year 2021, Opendoor generated $1.2 billion in revenue, a 59% increase over last year, and boosted its EBITDA by nearly $28 million. (See Opendoor stock charts on TipRanks)
Having now facilitated over 100,000 transactions in the past seven years, Opendoor is making significant headway in disrupting the real estate industry.
Valuation
While Opendoor Technologies is enjoying strong growth momentum, its rich valuation requires significant future growth to provide satisfactory total returns to current investors.
The market is currently pricing the company at 325x forward EBITDA and is running an EBITDA loss over the trailing 12 months. That said, growth is expected to be robust moving forward, with revenues expected to surge by 157.5% in 2021, and another 80.8% in 2022. If the company can continue to rapidly scale and fend off competition, it should eventually be able to reward investors with strong returns.
Wall Street’s Take
From Wall Street analysts, Opendoor earns a Moderate Buy consensus rating based on 2 Buys and 1 Hold in the past three months. Additionally, the average OPEN price target of $27.50 implies upside potential of 68.6%.
Summary and Conclusions
Opendoor Technologies is enjoying rapid revenue growth thanks to its innovative real estate transaction platform, and Wall Street is bullish on the stock.
However, investors should consider that the current valuation does require significant growth for the foreseeable future to be justified, making the stock somewhat speculative. As a result, any position taken in the stock should be sized accordingly.
Disclosure: On the date of publication, Samuel Smith had no position in any of the companies discussed in this article.
Disclaimer: The information contained herein is for informational purposes only. Nothing in this article should be taken as a solicitation to purchase or sell securities.