Opendoor (OPEN) Stock: Why Investors Sold Despite Revenue Topping Estimates

TLDR

• Opendoor posted Q3 revenue of $915 million, beating estimates by 7.8% despite a 33.6% year-over-year decline.
• Earnings per share missed badly at negative $0.12 versus expected negative $0.07.
• CEO Kaz Nejatian is transforming the company into a software and AI-focused business.
• Q4 EBITDA guidance of $45 million crushed expectations of negative $41.15 million.
• Shares dropped 8.5% to $5.99 following the earnings announcement.

Opendoor delivered a complicated Q3 earnings report that sent the stock lower despite beating revenue expectations. The real estate technology company reported $915 million in revenue, surpassing analyst estimates of $848.7 million.

The 7.8% revenue beat couldn’t mask underlying challenges. Sales dropped 33.6% compared to last year’s third quarter. The market quickly focused on the profit side of the equation.

Earnings per share came in at negative $0.12. Wall Street had expected negative $0.07. That 68.5% miss on EPS raised red flags for investors watching the company’s path to profitability.

Opendoor Technologies Inc., OPEN

Adjusted EBITDA landed at negative $33 million. Analysts were looking for negative $19.39 million. The 70.2% miss on this key metric added to concerns about operational efficiency.

The stock fell 8.5% to $5.99 in trading immediately after the report.

New CEO Charts Different Course

Kaz Nejatian made his first earnings call appearance as Opendoor’s CEO. His vision represents a major strategic shift for the company.

“We are refounding Opendoor as a software and AI company,” Nejatian told investors. He’s already implemented changes during his first month. The company brought employees back to the office and ended relationships with outside consultants.

Opendoor launched more than a dozen AI-powered products and features. Nejatian made clear the business will focus on technology rather than relying on transaction spreads and market conditions.

He outlined three priorities for reaching profitability. The company will increase seller transactions, improve unit economics through better pricing and faster resales, and cut expenses aggressively.

Nejatian committed to reaching breakeven adjusted net income by the end of 2026 on a forward-looking 12-month basis.

Volume and Margins Show Pressure

Opendoor sold 2,568 homes during Q3. That represents a decline of 1,047 units year-over-year. The metric has fallen an average of 16.2% annually over the past two years.

Revenue declined even faster at 27.3% annually over that same timeframe. The gap indicates the company is generating less revenue per transaction.

Operating margin deteriorated to negative 7.4%. The prior year’s Q3 operating margin was negative 4.9%. The two-year average sits at negative 5.9%.

Free cash flow margin provided one positive data point at 47.2%. That marks a sharp improvement from 4.1% in last year’s third quarter.

Forward Guidance Surprises

The Q4 outlook offered the report’s brightest spot. Opendoor guided to EBITDA of $45 million at the midpoint.

Analysts had modeled negative $41.15 million. The guidance beat suggests the turnaround strategy may be working faster than expected.

Revenue is projected to fall another 23% over the next 12 months according to analyst estimates. The company sold 2,568 homes in Q3 as transaction volume continues declining.