Opendoor Technologies Inc. (OPEN) reported strong Q3 2024 results, with revenue of $1.377 billion, up 40.5% y/y, and adjusted EBITDA of $(38.0) million, both exceeding expectations. However, Citi maintains a "Neutral/High Risk" rating due to persistent challenges in the housing market, which is experiencing its lowest level of existing home sales since 1995. Opendoor's inventory issues persist, with 23% of homes on the market for over 120 days, and management anticipates further deterioration in Q4. The company has raised spreads to manage risk, impacting acquisition levels and margins, with Q4 contribution margins expected between 1.6%-2.6%.
Opendoor's strategic shift includes a 17% reduction in force, saving $50 million annually, and a focus on capital-light solutions like "List with Opendoor" and "Marketplace," which are crucial for long-term success. Despite these efforts, Citi has lowered its Q4 revenue estimate to $966.6 million and adjusted EBITDA forecast to $(67.7) million. The target price is raised to $2.00 from $1.80, based on a 0.2x EV/GP multiple and a DCF fair value using a 13% WACC. Citi notes, "The challenging housing market, high interest rate environment, and what we believe to be too-high consensus estimates are keeping us on the sidelines here."