Shares of Opendoor Technologies (NASDAQ: OPEN) were pulling back Friday after the professional home-flipper offered disappointing guidance in its fourth-quarter earnings report.
The stock closed down 10.4% on the news.
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The housing market is still tough
In line with Opendoor's strategy of scaling back operations during a down market, revenue fell 70% year over year, or 11% sequentially, to $870 million, which topped expectations of $826.4 million.
Homes sold were down 69% to 2,364, while gross margin improved sharply from 2.5% in the quarter a year ago to 8.3%. It also cut its inventory by 60% to $1.8 billion.
On the bottom line, its adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) loss narrowed from $351 million to $69 million, and it reported a generally accepted accounting principles (GAAP) loss of $91 million, or $0.14 a share, which was better than the consensus estimate of $0.18.
CEO Carrie Wheeler said the company beat the high end of its guidance and has increased its acquisitions sequentially in 2023, building a new book of inventory that is performing well.
What 2024 holds for Opendoor
If Opendoor's report had ended there, the stock might have gained, but disappointing first-quarter guidance seemed to sink it. For the first quarter, Opendoor sees more of the same, calling for revenue of $1.05 billion to $1.1 billion, down from $3.12 billion in the quarter a year ago and below estimates of $1.21 billion. It also expects a contribution profit, which excludes overhead costs, of $40 million to $50 million and an adjusted EBITDA loss of $70 million to $80 million.
Revenue doesn't matter as much for a company like Opendoor as it brings in revenue every time it flips a home, regardless of whether it turns a profit. What counts is the bottom line. On that account, it's good to see the company making progress toward breakeven, but EBITDA loss is moving in the wrong direction sequentially into the first quarter.
That seems to explain why the stock is down despite Wheeler's comments about the company's improved inventory position. Opendoor may need some help from improved interest rates and the housing market in order to turn a profit.
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Jeremy Bowman has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Opendoor Technologies. The Motley Fool has a disclosure policy.
