The Opendoor stock price has crashed in the past few months and is now hovering near its all-time low. It has become a penny stock trading at $0.7, down by over 98% from its record high.
This crash has led to a $24 billion as its market cap has plunged from over $25.23 billion in 2020 to $576 million. This article explains why the OPEN stock price has crashed, and why technicals point to a rebound.
High interest rates and mortgage rates
Opendoor Technologies is one of the companies that benefited during the COVID-19 pandemic as the Federal Reserve slashed interest rates and the Federal government gave out free money.
These factors led to a surge in housing demand at a time when construction was largely frozen. As a result, Opendoor’s annual revenue surged from $2.5 billion in 2020 to $8 billion in 2021 and $15.56 billion in 2022.
Opendoor then joined the list of companies that thrived during the pandemic and then struggled when it ended. Think of other firms like PayPal, Zoom Communications, and Teladoc.
The pandemic boom led to inflation in the United States, prompting the Federal Reserve to push interest rates to the highest level in years. This, in turn, led to the highest mortgage rates in the US, and low sales.
Its financial results shows that its annual revenue has been in a downtrend after peaking at $15.56 billion in 2022. It made $6.9 billion in 2023 and $5.12 billion last year, and the trend is continuing.
OPEN sales dropped in the first quarter
The most recent financial results showed that the company’s revenue dropped by 2% in the first quarter to $1.2 billion. This decline happened after the number of homes sold dropped by 4% to 2,946.
The management attributed the declining sales to high mortgage rates, which stands at over 7% today, making them unreachable to most people. The management said:
“Housing activity has slowed, with clearance rates, or the rate at which homes go under contract, down nearly 25% versus this time last year, and delistings up over 30%. We expect these pressures to persist.”
Analysts believe that Opendoor’s sales will continue falling in the near term. The average estimate is that its revenue will drop by 0.74% in the second quarter to $1.5 billion. They also expect them to fall by 12% in Q3 to $1.21 billion. The annual revenue will come in at $4.9 billion, down by 4.75%.
Opendoor stock price has also dropped because of the growing losses. Its annual loss stood at $275 million in 2023 and grew to $392 million last year.
The management is now working to turn around its business. It has already laid off workers and is now transitioning its business to a broader selling platform that gives homeowners more choice in the form of cash offers and agent listing. The management said:
“We will see how our pilot evolves, but we believe that this channel will allow us to serve more sellers, monetize a greater portion of our funnel, improve conversion through a more personalized experience, and leverage our selling platform to drive more asset-light business.”
Opendoor stock price analysis
Opendoor stock chart | Source: TradingView
The daily chart shows that the OPEN stock price has been in a strong sell-off this year and is now hovering near its all-time low. On the positive side, there are signs that it has slowly formed a falling wedge pattern, comprising of two descending and converging trendlines.
This pattern often leads to a strong rebound when the two trendlines are converging. As such, while the downtrend may continue, there is a likelihood that it will bounce back in the coming months.
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