Opendoor stock plunges as losses soar along with revenue

Investors not impressed as iBuyer’s numbers beat consensus estimates

Opendoor's Eric Wu (Getty Images, iStock)
Opendoor's Eric Wu (Getty Images, iStock)

Opendoor, the largest and most prolific iBuyer in the U.S., is picking up the slack from Zillow’s surprise exit from the business, but its losses have widened as it has scaled.

The San Francisco-based company’s stock was down more than 25 percent Friday morning despite reporting revenue and earnings well ahead of Wall Street’s expectations.

The selloff was widely attributed to a drop in Opendoor’s contribution margin, a key profitability metric that factors in the costs of carrying and selling home inventory. It declined to 4 percent in the fourth quarter from 13 percent a year ago.

Opendoor and its two iBuyer competitors, Offerpad and Redfin, “robo-buy” homes using proprietary pricing algorithms, then renovate and sell them, hoping to profit on the flip. Last fall, Zillow exited the business, saying its algorithm wasn’t working as intended and the firm was burning through cash. Zillow reported an $880 million loss from the failed venture earlier this month.

Opendoor’s net losses amounted to 13 cents per share in the fourth quarter, 5 cents better than the consensus estimate by analysts. On an earnings call Thursday, CEO Eric Wu cited a “significant and durable shift” in demand for its services in 2021.

The company’s results “pulled forward our financial targets by years,” Wu said, later adding that 2022 “will prove to be a defining year for Opendoor.”

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Overall, the company’s revenue increased three-fold last year to $8 billion as the company sold nearly 22,000 homes — more than twice what it sold in 2020. Revenue grew 15-fold to nearly $4 billion in the fourth quarter, when it offloaded nearly 10,000 homes, or more than 10 times the number it sold in 2020’s final quarter.

Its home purchases in 2021 were also way up. In all, Opendoor bought about 37,000 homes last year, or six times the number it did in 2020. In the fourth quarter, the company purchased nearly 10,000 homes, nearly five times the number it bought in the year-ago quarter.

The company’s losses widened as it more than doubled its market footprint to 44 cities. For the fourth quarter, the company reported a net loss of $191 million, compared with a net loss of $54 million in the 2020 fourth quarter.

Net losses increased to $662 million overall in 2021 from $253 million the previous year, which the company attributed to a dramatic rise in “non-cash stock based compensation” — $536 million of it, versus $38 million in 2020.

Opendoor’s stock has suffered alongside those of other proptech firms that went public recently via mergers with special purpose acquisition companies, or SPACs. The company’s share price is down more than 70 percent in the past year.

Opendoor recently expanded its iBuying into its own backyard of the San Francisco Bay Area, the nation’s priciest housing market.