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Opendoor: A Real Estate Disruptor That Faces A Lot Of Uncertainty

Mar. 09, 2021 10:41 AM ETOpendoor Technologies Inc. (OPEN)RDFN, Z5 Comments
Alex Galanis profile picture
Alex Galanis


  • In an effort to disrupt the real estate market, Opendoor offers comprehensive digital solutions for the home buyer and seller.
  • Opendoor has seen strong revenue growth over the past 3 years with a CAGR of 53%.
  • Low gross and EBITDA margins cause some concern regarding the company's path towards profitability.
  • At current price levels and when considering future forecasted growth, Opendoor's valuation while not inexpensive does not seem unreasonable.


Opendoor Technologies (NASDAQ:OPEN) is a growing real estate disruptor that will attempt to change the way people engage in real estate transactions in the next years. The company presents an innovative business model based on digital operations, that has yet to show, however, an ability to generate profits through the strong margins that Opendoor currently lacks. While the potential for high growth and increasing market share is evident, Opendoor is faced with intense competition and other macroeconomic risk factors that will be discussed in this analysis. Finally, this analysis offers an insight into the company's valuation and the stock's upside potential.

Business Model

Opendoor's business model is simple, yet very smart and innovative. The company offers a comprehensive real estate solution for home buyers and sellers. Financing and refinancing through Opendoor are also available. People who wish to sell their home have two distinct options: they can list their property with Opendoor or sell directly to the company, receiving a competitive cash offer in a matter of a few days. Those houses will then be refurbished and relisted for sale by Opendoor. Buyers, on the other hand, can utilize the Opendoor app to tour (virtually and physically), visit homes, apply for financing at competitive rates and make an offer to buy a residential property. Help from local real estate experts is provided to the customer, through the company, in every step of the real estate buying or selling process. On both the seller and buyer side, what Opendoor aims at is to significantly simplify and speed up the process, while helping customers save on fees. Sellers can save on inspection and refurbishing costs. At the same time by selling directly to Opendoor and closing within a few days, a customer that is looking to move will save in double the mortgage expenses he would have to incur until his original home was sold with the traditional process. The home buyer is able

This article was written by

Alex Galanis profile picture
Financial Analyst, interested in U.S equities, examining Growth, Dividend Growth and Value Investment opportunities, as well as ETFs.  Accounting and Finance Graduate. CFA level ΙI candidate.

Analyst’s Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

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Comments (5)

Gaditana profile picture
Sounds massively capital intensive if the majority of their revenue comes from flipping houses, at small gross margins as noted below. What am I missing?
Guraaf profile picture
I don't think we can use P/S for $OPEN or similar companies. The margin is very little. Look at gross margin. Forget operating or net profit. Even then the business has nothing. They should be valued at 1B and not 12B. Sell or short.
I think your P/S multiple is off...not positive but, to calculate your estimated share price in 2023, wouldn't you need to take revenue per share*P/S multiple. Currently I think you are using revenue*P/S multiple. Feel free to correct me if I'm wrong.
I can visualize OPEN merging with PRCH in the near future, it just makes sense....that would also make me some $$$
Alex Galanis profile picture
@builderscott Definitely possible, and I agree it makes a lot of sense.
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