Opendoor Technologies Inc. (NASDAQ:OPEN) Analysts Are Reducing Their Forecasts For This Year
Market forces rained on the parade of Opendoor Technologies Inc. (NASDAQ:OPEN) shareholders today, when the analysts downgraded their forecasts for this year. Both revenue and earnings per share (EPS) forecasts went under the knife, suggesting the analysts have soured majorly on the business. Surprisingly the share price has been buoyant, rising 16% to US$5.72 in the past 7 days. It will be interesting to see if the downgrade has an impact on buying demand for the company's shares.
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 reasonable 3.3% increase on its sales over the past 12 months. Losses are supposed to balloon 104% to US$0.89 per share. Yet before this consensus update, the analysts had been forecasting revenues of US$18b and losses of US$0.31 per share in 2022. Ergo, there's been a clear change in sentiment, with the analysts administering a notable cut to this year's revenue estimates, while at the same time increasing their loss per share forecasts.
Check out our latest analysis for Opendoor Technologies
The consensus price target fell 19% to US$9.71, implicitly signalling that lower earnings per share are a leading indicator for Opendoor Technologies' valuation. Fixating on a single price target can be unwise though, since the consensus target is effectively the average of analyst price targets. As a result, some investors like to look at the range of estimates to see if there are any diverging opinions on the company's valuation. 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. We would probably assign less value to the forecasts in this situation, because such a wide range of estimates could imply that the future of this business is difficult to value accurately. As a result it might not be possible to derive much meaning from the consensus price target, which is after all just an average of this wide range of estimates.
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. Juxtapose this against the other companies in the industry with analyst coverage, which are forecast to grow their revenues (in aggregate) 7.7% annually. So it's pretty clear that, while Opendoor Technologies' revenue growth is expected to slow, it's expected to grow roughly in line with the industry.
The Bottom Line
The most important thing to take away is that analysts increased their loss per share estimates for this year. Lamentably, they also downgraded their sales forecasts, but the business is still expected to grow at roughly the same rate as the market itself. Given the scope of the downgrades, it would not be a surprise to see the market become more wary of the business.
That said, the analysts might have good reason to be negative on Opendoor Technologies, given dilutive stock issuance over the past year. For more information, you can click here to discover this and the 2 other risks we've identified.
Another way to search for interesting companies that could be reaching an inflection point is to track whether management are buying or selling, with our free list of growing companies that insiders are buying.
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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
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