Opendoor Technologies, Inc. (OPEN) A Bull Case Thesis

We came across a bullish thesis on Opendoor Technologies, Inc. (OPEN) on ValueInvestorsClub by lightspot. VIC is our preferred site because the ideas there are generally posted by aspiring analysts who produce in-depth research. We find the ideas presented on the site well thought out and worth a serious look. Click here for the full article. Below we summarized the OPEN bullish thesis:

Introduction

The San Francisco, California-based, Opendoor Technologies, Inc. (OPEN) is leading digital platform for transacting in residential real estate on a mobile device. Its online process helps it make instant cash offers on homes, make repairs on the properties it acquires, and relist them for sale.

Current Situation

The 3^rd quarter and 4^th quarter of 2020 saw OPEN’s sales drop drastically on the back of its hesitation in home purchases. With the additional gloom portrayed by the company’s previous guidance prompted the sell side analysts to downgraded the 1^st  quarter and FY2021 sales estimates. The negative opinion was reflected in the stock’s performance.

The Opportunity

The author believed that OPEN will have a blowout 1^st quarter, significantly beating the Street consensus estimates by over 60%. The overall, FY2021, thus also looks very promising. Moreover, the selling must be dried up by now. Although OPEN has a low margin business yet it is a good asset to own in the portfolio for long term.

Price Objective  

The analyst reckons OPEN will register the 1^st quarter 2021 sales in the range of $800 million-$1 billion against the sell side consensus of $620 million, and $5.3 billion versus $4 billion estimate by sell side. Units sales and new listings have, fortunately, grown substantially since early 2021. The Street seems to be missing the company’s year-to-date scaled up home acquisitions. The company has better matrixes than its main competitors –Zillow and Redfin. OPEN stock deserves a premium here and has the potential to, conservatively, print a $50 high by 2021-end.

Prime Risk An inventory build-up in case sales fail to catch up with company’s scaling up.