On Wednesday, Keefe, Bruyette & Woods adjusted their financial outlook for Offerpad Solutions Inc. (NYSE:OPAD) shares, decreasing the company's price target to $6.00 from the previous $6.25. The firm has chosen to maintain its Underperform rating on the stock.
The adjustment follows Offerpad's first-quarter 2024 results, which led to a revision of the firm's AEBITDA estimates for 2024 and 2025. The new forecast anticipates an AEBITDA of negative $3.5 million for 2024 and a positive $16 million for 2025. This marks a significant shift from the initial estimates of a positive $1 million in 2024 and $28 million in 2025.
The rationale behind this change is attributed to decreased revenues, which have been impacted by lower purchase volumes. However, this is partially counterbalanced by reductions in operational expenses (opex) and increased expectations for revenue from asset-light services.
The firm's analyst provided insight into the decision, stating, "Following 1Q24 results, we are reducing our 2024/2025 AEBITDA estimates to -$3.5mn/+$16mn (from +$1mn/+$28mn) driven by lower revenues from weaker purchase volumes, partly offset by lower opex and higher asset-light services revenue assumptions. We reduce our price target to $6.00 (from $6.25) and maintain our Underperform rating."
InvestingPro Insights
As investors digest the revised financial outlook for Offerpad Solutions Inc. (NYSE:OPAD) by Keefe, Bruyette & Woods, it's crucial to consider the latest data and insights. According to InvestingPro, Offerpad is currently grappling with significant challenges. The company's market capitalization stands at a modest $186.75 million, reflecting investor sentiment and the scale of the business. With a negative P/E ratio of -2.48, the market is signaling concerns about the company's profitability, particularly as analysts do not expect Offerpad to be profitable this year. This aligns with the company's reported net loss per share (both basic and diluted) of $2.76 over the last twelve months as of Q1 2024.
Offerpad's revenue has experienced a sharp decline, with a -68.94% change over the last twelve months as of Q1 2024. This contraction is further evidenced by a quarterly revenue growth rate of -53.19% in Q1 2024. While the company has managed to keep its gross profit margin at 8.63%, it is still facing weak gross profit margins, which is a concern for its overall financial health. The InvestingPro platform offers additional insights, including that the company is trading at a low revenue valuation multiple and is quickly burning through cash, which may be a red flag for investors looking for stable growth.
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