Real estate has remained a relatively undisrupted industry for the past several decades, but over the past 10 years, everything has changed. Tech start-ups like Opendoor Technologies (NASDAQ: OPEN) are reinventing the way homes can be bought and sold through iBuying. Now a publicly traded company, investors are looking to Opendoor as a potential way to participate in the growing sector of iBuying. If you're considering investing in Opendoor, here's an in-depth look at the company today.
Opendoor Technologies profile
Opendoor is a San Francisco tech start-up that was founded in 2014, which has since grown into the largest iBuyer in the market today, having helped 90,000 customers buy or sell a home since its inception. The company went public in December 2020 as a merger with Social Capital Hedosophia II, a SPAC (special purpose acquisition company), and is now traded on the NASDAQ stock exchange under the ticker OPEN.
Opendoor earns revenues by buying and selling residential property online using algorithms to make instant offers and then makes minor or major improvements to the property before relisting the property online through its Opendoor platform. The entire process, which uses technology to simplify the transaction from start to finish, can be done with less fees to the buyer or seller while allowing the company to purchase choice real estate in select markets at or near par value.
The company has added new services to its revenue stream, including tour and listing services with its partnered agents, which allows potential buyers to tour any home listed for sale (even outside of the Opendoor network) and sellers to list their home on Opendoor's online platform. It also added Opendoor Home Loans, which offers financing and refinancing options for buyers and sellers.
Right now, Opendoor offers its iBuying services in 41 markets, which include a range of services from iBuying to Opendoor Home Loans and tour and listing services. In 33 of its markets, there are full iBuying services, meaning people can buy from and sell to Opendoor. In eight markets, people can only sell to Opendoor. Full-service markets include:
- Asheville, North Carolina
- Austin, Texas
- Boise, Idaho
- Charlotte, North Carolina
- Colorado Springs, Colorado
- Dallas-Fort Worth
- Greensboro-Winston, South Carolina
- Greenville, South Carolina
- Jacksonville, Florida
- Kansas City, Kansas
- Killeen, Texas
- Las Vegas
- Los Angeles
- Minneapolis-St. Paul
- Nashville, Tennessee
- Northern Colorado
- Oklahoma City
- Orlando, Florida
- Portland, Oregon
- Prescott, Arizona
- Raleigh-Durham, North Carolina
- Riverside, California
- Sacramento, California
- Saint Louis
- Salt Lake City
- San Diego
- San Antonio, Texas
- Tampa, Florida
- Tucson, Arizona
Partial-service markets include:
- Birmingham, Alabama
- Chattanooga, Tennessee
- Corpus Christi, Texas
- Columbia, South Carolina
- Knoxville-Morristown, Tennessee
- Reno, Nevada
Opendoor Technologies news
As of Q1 2021, the company's revenues were $747 million, a 200% increase from Q4 2020 but a 41% decrease from the same quarter a year prior with a net loss of $270 million. While net losses can seem concerning, they are fairly common in the world of tech and not always an indicator of profitability or growth for the company on its own. Its net loss per attributable share has improved year over year and quarter over quarter, now at a loss of $0.48 per share, and its adjusted EBITDA improved to a loss of $2 million, a 92% quarter-over-quarter improvement and 88% year-over-year improvement.
Company revenues are driven by the number of properties that are purchased and, more importantly, the number of properties sold in the given quarter, which is one reason for dramatic changes year over year or quarter over quarter for iBuying companies. 2020 was a volatile year for iBuyers. Initial pandemic concerns caused iBuyers to pause operations until more certainty of the market direction was achieved and a better understanding of how to buy, show, and sell properties safely was determined.
Once it was clear the market was heating up and quickly propelling forward, Opendoor was able to recapture some of its losses from earlier in the year. Company offers in Q1 2021 reached record levels, showing a strong demand for Opendoor's services in the current market.
For the full year 2020, the company sold 9,913 homes, a 47% reduction from the number of properties sold in 2019. But net margin, or the amount of money that was made on average for the sold properties, increased 127% from 2019 to a total profit margin of $11,109 after interest, largely due to the rapid increase in home appreciation. In Q1 2021, the company purchased 3,594 properties, a 24% increase from the same quarter a year prior, and sold 2,462 properties, a 50% decrease from Q1 2020.
Growth is by far the No. 1 focus for Opendoor, with plans for rapid expansion into new markets. The company raised $860 million through an offering in February 2021 to help achieve its desired growth, added six new markets to its full iBuying services, in addition to expanding its buy box parameters 25%, which are the criteria for acquisitions in each unique market.
The company also introduced Opendoor-Backed Offers (OBO), a service providing an all-cash offer for prospective buyers. This allows the partnering buyers to bring an all-cash offer to the competitive market, and the company earns a fee for its cash services until the borrower secures long-term financing through its financing branch.
Opendoor Technologies stock price
Because the company only recently became available on a public exchange, there isn't much historical context when it comes to its share price.