Opened door (NASDAQ:OPEN) is the market leader in potentially lucrative online real estate, also referred to as iBuying. In light of Opendoor’s recent poor profit margins, it is easy to think otherwise. However, the company is in a niche that has the potential to disrupt the post-pandemic world. Moreover, its growth is likely to return to double-digit percentage levels, as a result of which OPEN shares will be much higher.
OPEN shares have lost about 50% of their value since complete SPAC merge December 17. It continues to lose a significant portion of its value as it has dropped 12% over the past month. For now, the stock price appears to be in an extremely bearish scenario.
The market ignores the huge potential equity gains that can be derived from Opendoor’s competitive advantage. However, according to average analysts’ estimates, the share price should be more than 120% higher than its current value. As market awareness of the company rises and macroeconomic conditions improve, its stock is poised for huge gains.
Key growth drivers
Opendur created huge $ 4.7 billion sales in 2019. This year it has operated in only 21 markets. Since then, the company has added 12 more markets. Moreover, by early 2022, the company plans to start operations in 42 markets. Naturally, these new sites will enable the company to cut average costs and accelerate revenue growth.
Meanwhile, the company presented its Opendoor Supported Service Offered (OBO). The service allows home buyers to submit bids with full payment. This attracted many buyers to Opendoor and created many cross-selling opportunities.
Moreover, a company’s lean culture is likely to have a positive long-term impact on its profitability. Knowing that Opendoor iBuying’s margins would be shockingly low, CEO Eric Wu reassured that the company’s culture was consistent with this reality. In this way, he has created a culture of cost-conscientiousness that focuses on maximizing savings and eliminating unnecessary perks typically provided by tech companies.
One of the main reasons for Opendoor’s success is its robust pricing algorithm. He does not seek to buy at very low prices and sell at very high prices, but instead seeks to determine the highest price he can pay for a house and still make a profit. Because his competitors are Zillow (NASDAQ:Z) and Notepad for suggestions – do not have such pricing mechanisms, they were forced to charge more for their houses than Opendoor in order to get the same profit from them.
Meanwhile, in the first quarter of the year, Zillow’s profitability per house rose significantly, but at the end of the quarter there were fewer houses than at the beginning. The first quarter has begun with 1531 houses and finished it with 1422 houses.
At the same time, Opendur started the quarter with 1827 houses in his inventory and finished the first quarter with 2,959 houses. The more homes iBuyer has in its inventory, the higher its earning potential.
Total for OPEN stocks
OPEN shares have dropped since they went public last year. Opendoor’s earnings have not been overly impressive to investors lately, but that looks set to change in the second half of the year. It has established itself as a leader in the nascent iBuying sector and has a competitive moat unmatched in the industry.
As a result of these points, OPEN shares rank among the top Covid 19 recovery companies with incredible long-term upside potential.
As of the date of publication, Muslim Farouk did not have (directly or indirectly) any positions in the securities referred to in this article. The opinions expressed in this article are those of the author and are published on InvestorPlace.com. Publishing rules