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Opendoor Technologies, is a real estate technology company that flips homes based on its own ibuying model. It also has a new marketplace service to connect sellers and buyers.
Opendoor stock has been hammered this year, falling 91% and taking the market cap to just 831 million dollars. With 1.3 billion in cash and more than 4 billion in debt the enterprise value is roughly 5.5 billion.
Revenue over the last 12 months was 16.5 billion which means the company is valued at ⅓ of revenue. But the company has reported large losses from its ibuying model and has had to write down the value of some of its properties.
This led to a huge 928 million loss in Q3 and takes the trailing twelve month loss to 1.14 billion. Opendoor bonds currently trade around 57 suggesting a good chance of bankruptcy.
Unsurprisingly, this has led to big changes at Opendoor. The company has laid off 18% of its staff and a shakeup in management means CEO Eric Wu has been replaced by previous CFO Carrie Wheeler. The company has also initiated a new marketplace service,to offset the losses of its ibuying business.
With a current short interest of 12% there are still traders out there betting that Opendoor stock has further to fall.
However, with 1.3 billion in cash and 6 billion of inventory there’s an argument that Opendoor is trading below its liquidation value. In other words, if Opendoor were to sell all its properties and pay off all its debt, the value might be more than the current market value suggests.
But closer inspection suggests that may not be the case. Opendoor finances its properties with variable interest rate debt and also holds a billion in convertible bonds. Property markets are notoriously illiquid and there’s no guarantee that Opendoor’s assets would fetch market price.
There’s a chance that Opendoor survives this year. But even if it does, there’s no evidence that its ibuying business model has any merit. Artificial intelligence models may be able to flip thousands of homes for a profit in a boom period but that doesn't mean it can do so during harder economic times.
For those reasons I give this stock a neutral rating. It looks too risky to buy but too cheap to short. But these are my own personal opinions not financial advice.
Opendoor Technologies, is a real estate technology company that flips homes based on its own ibuying model. It also has a new marketplace service to connect sellers and buyers.
Opendoor stock has been hammered this year, falling 91% and taking the market cap to just 831 million dollars. With 1.3 billion in cash and more than 4 billion in debt the enterprise value is roughly 5.5 billion.
Revenue over the last 12 months was 16.5 billion which means the company is valued at ⅓ of revenue. But the company has reported large losses from its ibuying model and has had to write down the value of some of its properties.
This led to a huge 928 million loss in Q3 and takes the trailing twelve month loss to 1.14 billion. Opendoor bonds currently trade around 57 suggesting a good chance of bankruptcy.
Unsurprisingly, this has led to big changes at Opendoor. The company has laid off 18% of its staff and a shakeup in management means CEO Eric Wu has been replaced by previous CFO Carrie Wheeler. The company has also initiated a new marketplace service,to offset the losses of its ibuying business.
With a current short interest of 12% there are still traders out there betting that Opendoor stock has further to fall.
However, with 1.3 billion in cash and 6 billion of inventory there’s an argument that Opendoor is trading below its liquidation value. In other words, if Opendoor were to sell all its properties and pay off all its debt, the value might be more than the current market value suggests.
But closer inspection suggests that may not be the case. Opendoor finances its properties with variable interest rate debt and also holds a billion in convertible bonds. Property markets are notoriously illiquid and there’s no guarantee that Opendoor’s assets would fetch market price.
There’s a chance that Opendoor survives this year. But even if it does, there’s no evidence that its ibuying business model has any merit. Artificial intelligence models may be able to flip thousands of homes for a profit in a boom period but that doesn't mean it can do so during harder economic times.
For those reasons I give this stock a neutral rating. It looks too risky to buy but too cheap to short. But these are my own personal opinions not financial advice.
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NewsTranscript
00:00 Should You Buy Open Door Stock?
00:02 Open Door Technologies, a real estate technology company has been facing tough times.
00:07 The company has seen its stock plummet 91% taking its market cap down to just $831 million.
00:14 Despite its revenue over the last 12 months reaching $16.5 billion the company is currently
00:18 valued at just 1/3rd of that amount.
00:21 That's because Open Door has reported large losses from its iBuying model and has had
00:25 to write down the value of some of its properties.
00:28 This led to a massive $928 million loss in Q3 bringing its trailing 12 month loss to
00:34 $1.14 billion.
00:36 Open Door bonds are currently trading at around 57 indicating a significant chance of bankruptcy.
00:42 Unsurprisingly these challenges have led to big changes at Open Door.
00:45 The company has laid off 18% of its staff and CEO Eric Wu has been replaced by previous
00:50 CFO, Cary Wheeler.
00:53 Open Door has also launched a new marketplace service to offset the losses of its iBuying
00:57 business.
00:58 Despite the company's struggles there are still traders betting that Open Door's stock
01:02 has further to fall with a current short interest of 12%.
01:05 However with $1.3 billion in cash and $6 billion of inventory some traders argue that the company
01:11 is trading below its liquidation value.
01:13 But closer inspection suggests that may not be the case.
01:17 Open Door finances its properties with variable interest rate debt and also holds a billion
01:21 in convertible bonds.
01:22 The property market is known for its lack of liquidity and there's no guarantee that
01:26 Open Door's assets would fetch market price if it were to sell them.
01:30 It's possible that Open Door will survive this year but even if it does there's no
01:34 evidence that its iBuying business model is sustainable.
01:37 Artificial intelligence models may be able to flip thousands of homes for a profit during
01:42 good economic times but that doesn't mean they can do so during harder times.
01:46 For those reasons I give this stock a neutral rating.
01:49 It looks too risky to buy and I don't have much faith in the iBuying business model.
01:53 But it also looks too cheap to short.
01:56 But this is my own personal opinions not financial advice.
01:59 For more detailed analysis visit our website overlookedalpha.com