On Monday, Deutsche Bank (ETR:DBKGn) adjusted its outlook on Opendoor (NASDAQ:OPEN) Technologies (NASDAQ:OPEN), reducing the price target to $2.40 from the previous $4.00, while keeping a Hold rating on the stock.
The revision follows Opendoor's first-quarter performance, which surpassed both Deutsche Bank's and the broader market's expectations. Sales of homes were higher than projected, and the profit from homes acquired after the second quarter of 2022—referred to as "new book"—helped push margins to 4.8%. This margin is above the company's suggested guidance and close to the lower end of their annual target range of 5%-7%.
Opendoor's EBITDA also exceeded forecasts due to restrained hiring and a strong emphasis on cost discipline, which is particularly notable as the company increases its purchase volumes.
Although home acquisitions were slightly below expectations, they nearly doubled year-over-year, and the number of homes under contract for purchase rose by 24% compared to the end of fiscal year 2023. The company's management is concentrating on wise home acquisition strategies to meet their goal of a monthly turnover of 2,200 homes, which is necessary for reaching adjusted net income breakeven.
The recent settlement with the National Association of Realtors (NAR) was highlighted by Opendoor's management, noting that the potential industry-wide reduction in commissions would be either neutral or beneficial for Opendoor, positioning the company favorably in terms of regulatory impact. Furthermore, Opendoor announced a $200 million equity offering program that allows the company to raise capital opportunistically over the next three years to manage its capital structure effectively.
"Given all that, we wait to see more evidence of a pickup in transaction velocity and maintain our Hold rating, though lower our PT to $2.40 (from $4.00), given the more uncertain macro backdrop associated with mortgage rate volatility, which implies a 1.2x FY25 EV/GP (from 2.0x)," said the analysts in the note.
InvestingPro Insights
In light of Deutsche Bank's revised outlook on Opendoor Technologies, it's worth considering additional insights from InvestingPro. The company's market capitalization stands at $1.53 billion, and despite a challenging revenue growth outlook with a significant decline of 63.01% in the last twelve months as of Q1 2024, Opendoor's gross profit margin remains at 8.61%. This indicates some resilience in profitability amidst a tough economic environment.
InvestingPro Tips suggest that Opendoor may face difficulties making interest payments on its debt and analysts are not expecting the company to be profitable this year. However, two analysts have revised their earnings upwards for the upcoming period, providing a glimmer of optimism for potential investors. Additionally, the company's stock has experienced a price drop of 18.15% over the past month, reflecting the high price volatility that traders should be aware of.
For those interested in a deeper dive into Opendoor's financials and future outlook, InvestingPro offers further analysis and tips. With the use of the coupon code PRONEWS24, readers can get an additional 10% off a yearly or biyearly Pro and Pro+ subscription, which includes access to a wealth of InvestingPro Tips—over 15 additional insights are available for Opendoor Technologies alone.
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