Opendoor reported Q4 2022 earnings after market close today. Revenue was $2.9B vs. $2.5B expected. EPS was -$0.63 vs. -$0.81 expected. So it was not as bad as analysts expected but still bad. The company lost $1.35B in 2022 vs. $662M in 2021. As of 12/31/2022, Opendoor had $1.086B of net equity. If Opendoor continues to lose money at the current rate, it will run out of money by the end of the year.
I always thought Opendoor’s value proposition was a bit odd. According to their new CEO, Opendoor wants to make the experience of buying and selling a home like booking a flight or hailing a ride. I don’t know why this should be the case for a major financial decision like buying/selling a home. This is the type of major life/financial decision people should be thoughtful of and they shouldn’t treat a home buying/selling decision like booking a flight or hailing a ride. A lot of money is involved, a life trajectory is being changed and a mistake can be costly.
Opendoor’s business model is also vulnerable during a housing downturn. I don’t know how well it would work during a housing boom as sellers can easily sell their homes. But during a housing bust, they can easily become a bag holder and with leverage, they can lose a lot of money really fast. The current high interest rate environment also erodes their margins as the short-term borrowing cost went from <1% to 5+% in a year. In summary, Opendoor is a product of the zero-interest rate era. Unless Opendoor can fix its business model, I have doubts of them surviving this downturn. Holding inventory on their balance sheet was a luxury of the zero-interest era. With interest rates so high, I don’t think they can afford that any more .