Opendoor (NASDAQ:OPEN) reported a narrower-than-expected loss for the fourth quarter, but shares fell sharply as the company's revenue outlook for the first quarter of 2024 fell short of Wall Street expectations. The digital platform for residential real estate transactions saw its stock drop 6.6% following the announcement, signaling investor concerns over the guidance miss.
For the fourth quarter, Opendoor posted an adjusted loss per share of $0.14, which was $0.10 better than analysts' estimates of a $0.24 loss. Revenue for the quarter was $870 million, surpassing the consensus estimate of $827.6 million. Despite beating the consensus estimates, the company's revenue declined substantially by 70% compared to the same quarter last year, reflecting ongoing challenges in the housing market.
CEO Carrie Wheeler highlighted the company's focus and execution throughout the past year, noting the sequential increase in home acquisitions and the development of a new inventory book. Wheeler also pointed to structural efficiencies that are expected to benefit Opendoor in the long term. "The progress we made in 2023, combined with the potential for a more normalized macro backdrop, positions us well to rescale our business in 2024," she stated.
Looking ahead, Opendoor provided first-quarter revenue guidance in the range of $1.05 to $1.1 billion, which falls below the analyst consensus of $1.173 billion. The company also expects a contribution profit of $40 million to $50 million and an adjusted EBITDA loss between $80 million and $70 million for the upcoming quarter.
The fourth quarter saw the company sell 2,364 homes, a 69% decrease from the same period last year, and a gross profit of $72 million, roughly in line with the $71 million reported in the fourth quarter of 2022. The net loss improved to $(91) million from $(399) million in the prior year's quarter. Opendoor ended the quarter with an inventory balance of $1.8 billion, representing a 60% decrease from the fourth quarter of 2022.
Investors reacted negatively to the first-quarter guidance, overshadowing the fourth-quarter earnings beat. The decline in share price reflects the market's reaction to the company's short-term outlook, with the first-quarter revenue guidance being the primary driver of the move. Opendoor's performance and future guidance will continue to be closely watched as it navigates the evolving real estate market.
Following the report, BofA analysts described the outlook as "soft." The firm reiterated an underperform rating and $2.50 price target on the stock.
"Opendoor continues to show strong expense management and leveraging new avenues to promote its services (home acquisitions through partnership channels up 140% since 1Q’23)," said Bank of America. "However, given high mortgage rates (historic low affordability), and low inventories, we believe inventory turnover will remain constrained over the next several quarters, driving Opex deleverage and company will likely face difficulties in scaling to the $10bn annual revenue rate."
"We also see significant risks with Opendoor’s business model and ability to generate sustainable profits," they concluded