Opendoor makes instant cash offers on homes through an online process, makes repairs on the properties it purchases, and then relists them up for sale. It also provides mobile application-based home buying services along with financing. As of March 2021, the company operates in 27 markets in the US.
Canadian celebrity investor Chamath Palihapitiya, who bought Opendoor through a SPAC last year for $4.8 billion, pioneered taking private unicorns public by reverse merging them into special purpose acquisition companies — an idea he’s called “IPO 2.0.”
Opendoor is disrupting residential real estate by giving instant competitive cash offers and certainty to sellers, and charging about a 7% service fee, slightly more than a traditional real estate agent’s 6%. It has the highest volume, revenue, and gross margins compared to its 3 main competitors – Zillow, Offerpad, and Redfin. It’ also doubling its footprint from 21 markets to 42 markets in FY2021, which would be approximately $10 billion in potential run-rate revenue.
Opendoor is estimating $3.5 billion of revenue for FY2021
This is conservative as the forecast was likely prepared during July or August 2020. There was uncertainty back then (some said widespread vaccination by 2022) yet vaccines are mostly available to the general public now. Offerpad ‘s forecast from its presentation during March 2021 also shows more aggressive FY2021 revenue growth compared to FY2019.
Wall Street is estimating $4.0 billion of revenue for FY2021, which is also conservative. A better baseline revenue for FY2021 is probably around $6.0 billion, which can be derived by applying Offerpad’s FY2021 growth rate from FY2019 to Opendoor. $6.0 billion is also Opendoor’s FY2022 revenue forecast and we are reopening a year sooner compared to some conservative forecasts back in July 2020.
Cathie Wood’s ARK Fintech Innovation bought 644,400 shares on 4/12/21
And then 46,400 shares on 4/13/21. They then bought 456,600 more shares on 4/19/21 and 137,988 shares on 4/20/21. The current share price of around $19.00 has a lot of upside. If we use $6.0 billion as baseline FY2021 revenue, 5x revenue multiple is about $52 a share. It is $93 a share if we apply FY2022 revenue using management’s 79% revenue growth from FY2021 numbers.
Long term, if Opendoor’s business model successfully disrupts the residential real estate market we could be looking at a share price that could go higher than $75. They will report first-quarter 2021 financial results for the period ended March 31, 2021, following the close of the market on Tuesday, May 11, 2021.
On that day management will host a conference call and webcast at 2:00 p.m. PT (5:00 p.m. ET) to discuss the company’s business and financial results.