Opendoor: Proof that Wall Street Doesn’t Understand Real Estate

[NOTE: I am long OPEN, and have been for a while as the self-proclaimed Biggest Bull on Market Making iBuying in the World.]

I’m working on a far more in-depth look at Opendoor’s amazing Q1 results. But I had to get this off my chest. Opendoor’s stock performance is proof that Wall Street simply doesn’t understand American residential real estate and how it works and doesn’t work.

Here are some topline results from Q1:

First Quarter 2022 Key Highlights

  • Highest quarterly revenue of $5.2 billion, up 590% versus 1Q21; with 12,669 total homes sold, up 415% versus 1Q21, demonstrating rapid consumer adoption of our product offerings
  • Record gross profit of $535 million, versus $97 million in 1Q21, up 452% versus prior year; gross margin of 10.4%, versus 13.0% in 1Q21
  • First quarter of positive net income of $28 million, versus $(270) million in 1Q21
  • Adjusted Net Income of $99 million, versus $(21) million in 1Q21
  • Record Contribution Profit of $332 million, versus $76 million in 1Q21, up 337% versus prior year; 21st consecutive quarter of positive Contribution Margin which was 6.4%, versus 10.2% in 1Q21
  • Adjusted EBITDA of $176 million versus $(2) million in 1Q21; fourth consecutive quarter of positive Adjusted EBITDA and three times higher than what was generated in all of 2021; Adjusted EBITDA Margin of 3.4% versus (0.3)% in 1Q21
  • Inventory balance of 13,360 homes, representing $4.7 billion in value, up 455% versus 1Q21
  • Purchased 9,020 homes, up 151% versus 1Q21
  • Launched San Francisco Bay Area, bringing us to 45 markets at the end of 1Q22

All emphasis is mine, to point out the obvious. And, Opendoor is guiding to Q2 revenues of $4.1 to $4.3 billion, up 254%, and Adjusted EBITDA probably up 600% YOY.

If there’s some way of blowing shit up more impressively than this, I’m not sure what it is. And yet…

Since announcing its record-breaking asskicker of a quarter, OPEN is down to near it’s all-time low. Since reporting, the stock is down from $8 to $6.87 as of right now.

Going through some of the details, what I’m seeing is sending shivers up my spine. It’s a combination of fear and delight, as Opendoor firmly snatches the title of “Most Important Company in Real Estate” away from Zillow. I’ll go through all of that in my longer post, mostly likely in VIP.

But hey, when a company like this shows results like this, backed up with what appears to be the kind of crystal clear vision of where the industry is, how it works, how it doesn’t work, its strengths and weaknesses, opportunities and threats that Zillow once had, and some $2.8 billion in cash with $35+ billion in purchasing power… and then the Street sells into that news?

I imagine this is part of the whole “Fed raised rates, so housing is gonna collapse” narrative going on right now that is dragging down the entire real estate sector. To me, this feels a little bit like thinking “Gas prices are skyrocketing, so automakers are gonna suffer” and then selling Tesla.

I guess it’s time to load up more on OPEN then.


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Rob Hahn

Managing Partner of 7DS Associates, and the grand poobah of this here blog. Once called "a revolutionary in a really nice suit", people often wonder what I do for a living because I have the temerity to not talk about my clients and my work for clients. Suffice to say that I do strategy work for some of the largest organizations and companies in real estate, as well as some of the smallest startups and agent teams, but usually only on projects that interest me with big implications for reforming this wonderful, crazy, lovable yet frustrating real estate industry of ours.

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1 thought on “Opendoor: Proof that Wall Street Doesn’t Understand Real Estate”

  1. EXPI is suffering the same broad spectrum sector pummeling despite quality growth, no long term debt, and bottom line scalable profit.

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