Stock to Watch in January: Opendoor Technologies

  At the end of 2020, real estate platform Opendoor Technologies completed its IPO through a merger with SPAC (a special purpose purchasing company) headed by former Facebook executive and venture capitalist Chamath Palihapitiya. On December 21, the stock had risen above $ 32. Since then, however, the shares have lost nearly a third of their value, yet Opendoor still has a market capitalization of over $ 12 billion at the time of this writing. This is an exaggerated valuation for a company that had just $ 173 million in adjusted gross profit in the first nine months of 2020.

There is a 23 percent decrease compared to the same period of 2019.

For Opendoor, gross profit, rather than revenue, is an important metric because it is a direct home buyer and seller. (this is true when compared to a traditional broker who never takes ownership of the house). Gross profit is a measure of what Opendoor keeps after selling the house it bought directly from a landlord. However, this service is not unique. Zillow Group (NASDAQ: Z) and Redfin (NASDAQ: RDFN) are disrupting the status quo in real estate with the same type of service. However, Opendoor aims to eliminate the complexity of purchasing and selling houses for consumers by offering a quick and easy way to vacate a property without the need for a real estate agent, and only serves in this area. We are still not sure whether Opendoor represents a major technological advance over its closest competitors. The company outperformed Zillow and Redfin, which increased both revenue and profitability measures during the 2020 pandemic.

Redfin made a gross profit of $ 152 million, especially in the first nine months of the year, a 46 percent increase compared to the same period of the previous year and a market value of over $ 7 billion.

So there is quite a discrepancy between the Redfin and Opendoor valuations. Either it deserves to be valued at a much higher price to reflect Redfin's rapidly growing operation, or the enthusiasm of the early investors for Opendoor is overrated. We look forward to the results for the fourth quarter of 2020, which will be published in January. Considering the enormous market opportunity, Opendoor is a remarkable opportunity.   Source: https://www.fool.com/ You may also be interested in this:

Stock to Watch in January: Alibaba