The Opendoor (NASDAQ:OPEN) stock took a big hit Wednesday. It fell nearly 21% following a poor Q2 report, and a gloomy outlook for the coming quarter.
The shares fell below $2 in the course of the session. This was a significant loss compared to the gains made during the meme stock surge last month.
Investors’ moods can quickly change when they focus on the actual company numbers.
Opendoor feels the heat. Investors weren’t pleased with Opendoor’s $1.6 billion second quarter revenue. This was a slight increase over last year.
Stocks fell after the company reported a net loss of $29 million, but the guidance for the third quarter was what really sent them tumbling. Opendoor anticipates revenue will drop dramatically, settling somewhere between $800 and $875 millions.
This is a decline of 36% from the previous year, which speaks volumes to how badly the housing market has cooled. The company expects a difficult period with mortgage rates high and consumers on the sidelines.
Opendoor stock: Margins down, doubts up
During the earnings call, investors were further rattled when Carrie Wheeler, the CEO of the company described the macro-environment as “challenging” and said that the firm is cutting marketing spending to conserve cash.
Opendoor is also moving away from just being a platform for home flipping to a more “Product to Platform model”, working with more real estate agents to expand its services.
This pivot has raised new concerns as it is common for big strategic shifts to be accompanied by execution risk.
Numbers didn’t help to ease fears. Opendoor’s EBIT margin was negative at 6.5%. It also reported negative cash flows of $279 millions and liabilities exceeding $1 billion.
The company also has to race against the clock in order to stay on the Nasdaq. The recent delay of a special shareholder vote to lift the stock above Nasdaq’s minimum price was only compounding the uncertainty.
Price nears key support level
Opendoor was dangerously close, on the technical front, to the $1.87 support level after its steep fall to $1.99.
The momentum indicators don’t offer much relief either. With a MACD that is bearish and the stock reaching the lower limit of the Bollinger band, all the signs point towards continued downward pressure.
The sky-high implied volatilities in the options markets suggest that investors should be prepared for further turbulence. Other real estate technology players, like Zillow, managed to stay steady and even posted modest gains for the day.
This split shows how fragile Opendoor was in its recent rally fueled by memes and the doubts that still remain about their ability to navigate a difficult housing market, while switching to a different business model.
Opendoor shares plunge 21% following weak forecasts: Could more decline be on the way? The ICD first published the post Opendoor stock plunges 21% after weak forecast: could more downside be ahead?
