iBuying is risky per BofA
Opendoor Stock Tumbles. The ‘iBuying Model Is Risky.’
Opendoor Technologies was falling on Wednesday after BofA Securities took a bearish view on the real estate platform despite growing revenue. It’s the iBuying model the analysts don’t like.
BofA analyst Curtis Nagle initiated coverage on shares of Opendoor (ticker: OPEN) at Underperform with an $8 price target. The stock fell about 3% to $10.34 on Wednesday.
iBuying — the buying and selling of homes online — is seen by Nagle as an “inherently risky and largely untested business model that carries low to negative margins and requires high debt to finance transactions,” he wrote in a research note.
Moreover, the digital platform’s inventory growth significantly has outpaced revenue growth in 2021, meaning that Opendoor has purchased more houses using large amounts of debt and sold less. The ratio of purchased to sold homes rose to nearly 3-to-1 in the third quarter even as the housing market started slowing down in late 2021.
Home prices have been falling and existing home turnover is expected to turn negative in 2022 after two strong years, said Nagle, adding to the list of factors overshadowing the company’s growing revenue and a high potential for shares gains.
Opendoor shares have declined more than 50% since rival Zillow’s (Z) exit from iBuying, signaling markets’ hesitancy in betting on the home-flipping business. That said, the exit late last year from Zillow does remove competition for Opendoor, challenging the negative outlook for the stock, Nagle said.
BofA estimates Opendoor will report a loss of 81 cents a share in 2022, wider than the loss of 45 cents expected by analysts polled by Bloomberg. BofA projects $12.19 billion in sales at Opendoor for 2022 vs. $7.42 billion in 2021.
Opendoor is rated at Overweight by analysts tracked by FactSet with an average target price of $25.57.
Recent OPEN News
- Form 4 - Statement of changes in beneficial ownership of securities • Edgar (US Regulatory) • 09/18/2024 12:01:22 AM
- Form 4 - Statement of changes in beneficial ownership of securities • Edgar (US Regulatory) • 09/18/2024 12:01:11 AM
- Form 4 - Statement of changes in beneficial ownership of securities • Edgar (US Regulatory) • 09/18/2024 12:00:51 AM
- Form 8-K - Current report • Edgar (US Regulatory) • 09/12/2024 08:09:16 PM
- David Benson joins Opendoor Board of Directors • GlobeNewswire Inc. • 09/12/2024 08:05:21 PM
- Form 4 - Statement of changes in beneficial ownership of securities • Edgar (US Regulatory) • 09/11/2024 08:54:39 PM
- Form 144 - Report of proposed sale of securities • Edgar (US Regulatory) • 09/10/2024 08:20:27 PM
- Form 4 - Statement of changes in beneficial ownership of securities • Edgar (US Regulatory) • 08/30/2024 08:00:30 PM
- Opendoor to Present at Goldman Sachs Communacopia & Technology Conference • GlobeNewswire Inc. • 08/29/2024 01:00:27 PM
- Form 4 - Statement of changes in beneficial ownership of securities • Edgar (US Regulatory) • 08/16/2024 08:03:59 PM
- Form 4 - Statement of changes in beneficial ownership of securities • Edgar (US Regulatory) • 08/07/2024 10:54:33 PM
- Form 4 - Statement of changes in beneficial ownership of securities • Edgar (US Regulatory) • 08/02/2024 08:51:53 PM
- Form 10-Q - Quarterly report [Sections 13 or 15(d)] • Edgar (US Regulatory) • 08/01/2024 08:25:53 PM
- Form 8-K - Current report • Edgar (US Regulatory) • 08/01/2024 08:24:43 PM
- Opendoor Announces Second Quarter of 2024 Financial Results • GlobeNewswire Inc. • 08/01/2024 08:05:28 PM
- Mainstay, a Comprehensive Market Intelligence Platform for the Single-Family Rental Industry, Launches as an Independent Company from Opendoor • GlobeNewswire Inc. • 08/01/2024 08:00:00 PM
- Form 4 - Statement of changes in beneficial ownership of securities • Edgar (US Regulatory) • 07/19/2024 08:02:36 PM
- Form 4 - Statement of changes in beneficial ownership of securities • Edgar (US Regulatory) • 07/17/2024 11:01:42 PM
- Form 4 - Statement of changes in beneficial ownership of securities • Edgar (US Regulatory) • 07/17/2024 11:01:31 PM
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- Form 144 - Report of proposed sale of securities • Edgar (US Regulatory) • 07/16/2024 08:33:05 PM
- Form 4 - Statement of changes in beneficial ownership of securities • Edgar (US Regulatory) • 07/10/2024 09:31:22 PM
- Form 4 - Statement of changes in beneficial ownership of securities • Edgar (US Regulatory) • 07/08/2024 10:15:40 PM
- Opendoor to Report Second Quarter 2024 Financial Results on August 1st, 2024 • GlobeNewswire Inc. • 07/08/2024 01:00:36 PM
- Form 4 - Statement of changes in beneficial ownership of securities • Edgar (US Regulatory) • 06/18/2024 09:46:29 PM
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