The analysts covering Opendoor Technologies Inc. (NASDAQ:OPEN) delivered a dose of negativity to shareholders today, by making a substantial revision to their statutory forecasts for this year. Both revenue and earnings per share (EPS) estimates were cut sharply as the analysts factored in the latest outlook for the business, concluding that they were too optimistic previously. Bidders are definitely seeing a different story, with the stock price of US$5.72 reflecting a 16% rise in the past week. With such a sharp increase, it seems brokers may have seen something that is not yet being priced in by the wider market.
Following the downgrade, the current consensus from Opendoor Technologies' 13 analysts is for revenues of US$16b in 2022 which - if met - would reflect a modest 3.3% increase on its sales over the past 12 months. Losses are supposed to balloon 104% to US$0.89 per share. However, before this estimates update, the consensus had been expecting revenues of US$18b and US$0.31 per share in losses. So there's been quite a change-up of views after the recent consensus updates, with the analysts making a serious cut to their revenue forecasts while also expecting losses per share to increase.
The consensus price target fell 19% to US$9.71, with the analysts clearly concerned about the company following the weaker revenue and earnings outlook. It could also be instructive to look at the range of analyst estimates, to evaluate how different the outlier opinions are from the mean. There are some variant perceptions on Opendoor Technologies, with the most bullish analyst valuing it at US$19.00 and the most bearish at US$5.25 per share. With such a wide range in price targets, the analysts are almost certainly betting on widely diverse outcomes for the underlying business. With this in mind, we wouldn't rely too heavily on the consensus price target, as it is just an average and analysts clearly have some deeply divergent views on the business.
Of course, another way to look at these forecasts is to place them into context against the industry itself. It's pretty clear that there is an expectation that Opendoor Technologies' revenue growth will slow down substantially, with revenues to the end of 2022 expected to display 6.7% growth on an annualised basis. This is compared to a historical growth rate of 512% over the past year. Compare this to the 110 other companies in this industry with analyst coverage, which are forecast to grow their revenue at 7.7% per year. Factoring in the forecast slowdown in growth, it looks like Opendoor Technologies is forecast to grow at about the same rate as the wider industry.
The Bottom Line
The most important thing to note from this downgrade is that the consensus increased its forecast losses this year, suggesting all may not be well at Opendoor Technologies. Lamentably, they also downgraded their sales forecasts, but the business is still expected to grow at roughly the same rate as the market itself. After such a stark change in sentiment from analysts, we'd understand if readers now felt a bit wary of Opendoor Technologies.
As you can see, the analysts clearly aren't bullish, and there might be good reason for that. We've identified some potential issues with Opendoor Technologies' financials, such as dilutive stock issuance over the past year. For more information, you can click here to discover this and the 2 other warning signs we've identified.
Of course, seeing company management invest large sums of money in a stock can be just as useful as knowing whether analysts are downgrading their estimates. So you may also wish to search this free list of stocks that insiders are buying.
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Opendoor Technologies Inc. operates a digital platform for residential real estate in the United States.
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Adequate balance sheet and fair value.