Less iBuying could limit Opendoor’s potential: analyst
Mike DelPrete examines firm’s strategy shift and partnership with Zillow
Opendoor is buying fewer homes as it reels from heavy losses.
While that will cut expenses, it could also limit the company’s future profits and jeopardize its partnership with Zillow, according to a report by analyst Mike DelPrete.
“If a coffee shop loses money on each coffee it sells, the solution is not to sell less coffee, it’s figuring out a way to sell coffee more profitably,” DelPrete, a professor at the University of Boulder Colorado and investor, says in the report.
Opendoor appears to be relying more on Opendoor Exclusives (its off-market offerings) and Opendoor Complete (a platform where consumers buy and sell homes) because they require fewer assets, DelPrete said.
The pivot comes two months after Opendoor co-founder Eric Wu stepped down as CEO to head the company’s marketplace product.
Zillow and Opendoor in August agreed on a multi-year partnership that gives homeowners selling through Zillow the option to sell to Opendoor and potentially to use other Zillow services in the transaction.
But DelPrete appeared confused by Zillow’s strategy of steering its users to a company that is scaling back its iBuying and offering services that compete with Zillow’s.
“If Opendoor is buying significantly fewer homes and is guiding more consumers to its Power Buyer products, why would Zillow want to partner with them?” DelPrete asked in the report.
DelPrete noted that Opendoor bought fewer than 4,000 homes last quarter, its lowest amount since 2021. It had bought more than 8,000 in the third quarter and roughly 14,000 in the second.
New Opendoor weekly listings dropped below 200 in January, the lowest levels since the peak pandemic months of April 2020 through January 2021.
Opendoor lost nearly $1 billion in the third quarter of last year, the most recent period for which data is available. The company attributed most of that loss to a $573 million writedown in home values and suggested that number could grow.
Opendoor laid off 18 percent of its workforce, or 550 people, after posting its third-quarter results. Its stock price plunged last year to about $1 but has more than doubled during the market’s run-up since then, closing yesterday at $2.16. It peaked at about $35 per share in early 2021.