Opendoor drops after big bottom-line miss in Q3, with red ink poised to swell in Q4
Opendoor Technologies initially tanked in after-hours trading after the online real estate company posted an adjusted loss before interest, taxes, depreciation, and amortization that was much bigger than analysts had anticipated. The stock went on to pare that decline and trade in positive territory before reversing deep into the red.
The Q3 results:
Revenue: $915 million (compared to an estimate of $852.9 million and guidance for $800 million to $875 million)
Adjusted EBITDA: -$33 million (estimate: -$23.7 million, guidance: -$28 million to -$21 million)
The red ink is poised to swell in the fourth quarter, with management guiding for an adjusted loss “in the high $40 millions to mid $50 millions,” which is a shade negative compared to Wall Street’s view for adjusted EBITDA of -$47.6 million.
The company is aiming to break even on adjusted net income “by the end of 2026, measured on a 12-month go-forward basis.”
“Our path to profitability is clear: transact with more sellers, strengthen our unit economics through better pricing and resale speed, and drive operational efficiency by being ruthless on expenses,” CEO Kaz Nejatian said in the press release.
Management also announced a dividend of tradable warrants to be issued to shareholders of record as of 5 p.m. ET on November 18. For every 30 shares owned, the holder will receive warrants that expire on November 20, 2026, that entitles their holders to purchase one share at the exercise prices of $9, $13, and $17.
The third quarter was transformative for the company, as it rose to prominence after EMJ Capital hedge fund manager Eric Jackson posted a bullish thesis on X that sparked a wave of retail interest and buying activity. This newfound attention spurred real change at the company late in the quarter, as embattled CEO Carrie Wheeler resigned and was replaced by former Shopify COO Kaz Nejatian while cofounders Eric Wu and Keith Rabois joined the board of directors. That management overhaul spurred the stock’s largest one-day gain on record.
It’s far too soon for the new leadership to have made much of a mark on the company’s operational performance in these financials.
The company provided three key objectives that it believes will enable it to achieve its profitability target:
Scale acquisitions
Improve unit economics and resale velocity
Build operating leverage
Its so-called “$OPEN Army” of passionate retail shareholders have no shortage of suggestions on what management should do to improve the company’s outlook going forward. They’ve had the opportunity to submit questions for the conference call ahead of time through Robinhood’s Say Technologies platform.
Judging by the questions that have received the most upvotes so far, Nejatian and interim CFO Christy Schwartz will be faced with these queries and more:
When will we see a dramatic change in profitability?
Is there a partnership looming with Robinhood?
(Robinhood Markets Inc. is the parent company of Sherwood Media, an independently operated media company subject to certain legal and regulatory restrictions.)
On October 24, Opendoor surged amid a bevy of social media posts referencing unconfirmed rumors about the potential for the company to pursue the tokenization of real-world assets (its real estate), with Robinhood frequently mentioned as a would-be partner.
Year to date, Opendoor closed as low as $0.51 in late June and at a peak of $10.52 on September 11.
