UBS cuts Opendoor Technologies target to $1.20, keeps Neutral rating

On Tuesday, UBS analyst Chris Kuntarich revised the price target for Opendoor Technologies (NASDAQ:OPEN) to $1.20 from the previous target of $2.00, while maintaining a Neutral rating on the stock. The new target comes as the stock trades at $1.14, near its 52-week low of $1.18, having lost over 60% in the past year. Kuntarich’s assessment comes in light of various challenges faced by the company, including a significant portion of its inventory remaining unsold for over 120 days, a notable decline in visits to new listings, and an increase in delistings reaching decade highs. InvestingPro data reveals the company operates with a concerning debt-to-equity ratio of 3.25.

The analyst forecasts stable year-over-year revenue growth for the fiscal year 2025, slightly above the street’s expectations, supported by a 5% Contribution Margin, which is marginally higher than the street’s 4.7% estimate. This margin sits at the lower end of the company’s expected range. According to InvestingPro data, the company’s gross profit margin stands at just 8.4%, with negative EBITDA of $248 million in the last twelve months. Despite these projections, Kuntarich expressed concerns over Opendoor’s ability to avoid price reductions within its existing inventory, given the current market trends.

UBS anticipates that the first quarter of 2025 will represent the peak in adjusted operating expenses for Opendoor, reaching approximately $90 million. The firm expects subsequent reductions in costs, as the company’s ongoing cost-control measures and further optimization efforts take effect.

While UBS acknowledges that Opendoor’s implementation of a new and more dynamic pricing model in the fourth quarter could enhance the company’s visibility and potentially stimulate faster growth, the firm remains cautious. According to UBS’s estimates, Opendoor is unlikely to achieve adjusted EBITDA profitability in the fiscal year 2025, projecting a loss of $102 million, which is slightly worse than the street’s projection of a $96 million loss.

In summary, while UBS recognizes Opendoor’s efforts to control costs and the potential benefits of its new pricing strategy, the analyst firm maintains a Neutral stance on the stock due to the expected lack of profitability in the near term. For a deeper understanding of Opendoor’s financial health and growth prospects, investors can access comprehensive analysis and over 20 additional key insights through InvestingPro’s detailed research report.

In other recent news, Opendoor Technologies Inc. reported its fourth-quarter 2024 earnings, surpassing analyst expectations with an earnings per share (EPS) of -$0.16, slightly better than the forecasted -$0.17. The company also exceeded revenue projections, posting $1.08 billion against a forecast of $965.32 million, marking a 25% year-over-year increase. Despite these positive earnings results, Opendoor’s full-year revenue decreased to $5.2 billion from $6.9 billion in 2023, reflecting ongoing challenges in the real estate market. Additionally, the company’s adjusted EBITDA loss improved significantly to $49 million in the fourth quarter, down from a loss of $627 million in 2023. In terms of analyst activity, there were no specific upgrades or downgrades reported, but the company is focusing on cost efficiency and profitability. Opendoor plans to acquire over 3,500 homes in the first quarter of 2025, with a projected revenue range of $1.0 billion to $1.075 billion. These developments highlight Opendoor’s efforts to navigate a challenging market environment while optimizing its operational strategies.

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