Stocks to buy

Opendoor Stock Is Poised to Move Much Higher as Sales Spike

Opendoor (NASDAQ:OPEN), the digital platform for residential real estate, is still quite undervalued even though OPEN stock is up a good deal. As I predicted in my article back in July, the company’s massive buying spree — along with rising real estate market prices — has led to positive profits.

An illustration of a miniature house with a "for sale" sign popping out of a smartphone.

Source: Shutterstock

OPEN stock has actually spiked 48% in the past two months, moving to $21 as of Sept. 27 from Jul. 19, when it troughed out at $14.19. But year-to-date (YTD), the stock is actually down almost 12%.

Now, though, I estimate that OPEN stock is poised to move substantially higher as its adjusted profits grow. Here’s why:

OPEN Stock: Projections for Higher Sales and Profits

On Aug. 11, Opendoor released stellar second-quarter earnings results in a shareholder letter. For example, revenue rose 59% over the prior quarter to $1.185 billion. For the first time, the company also saw positive adjusted net income of $2.5 million. These figures alone mean good things for OPEN stock.

But that’s not all. On top of this, Opendoor reported a positive adjusted EBITDA (earnings before interest, taxes, depreciation, and amortization) of $25.6 million. The growth in homes acquired also came in 136% over Q1. To say the least, this company is on a massive buying spree in the middle of a huge home price hike.

In the results, OPEN projected that its revenue will be between $1.8 billion and $1.9 billion in Q3 as well. This would represent 56% growth over the prior quarter, indicating that the company’s revenue is climbing.

Analysts now forecast that revenue will hit $6.65 billion for 2021, up roughly 158% over last year’s $2.58 billion. In addition, these analysts also have an average forecast of $12 billion in revenue for 2022. That represents potential growth of 80.5% over this year’s revenue forecast.

What Opendoor Is Worth

Given such huge growth rates, this stock deserves a fairly high value. Recently, Opendoor had a market capitalization of $12.7 billion. Using this market cap, OPEN stock has a price-sales (P/S) multiple of 1.90 (i.e., $12.7 billion market cap / $6.65 billion in 2021 sales).

To be conservative, though, let’s assume that the market eventually values OPEN stock at 1.5 times 2022 sales estimates. That gives it a market value of $18 billion (1.5 x $12 billion). This is 41.8% above the present $12.7 billion market value for Opendoor.

In other words, OPEN stock will be worth $29.80 (i.e., 41.8% over its price of $21 as of Sept. 27). This assumes that the market ultimately values its sales at 1.5 times.

However, using a 2 times P/S valuation, the market value could be some $24 billion (i.e., 2x $12 billion 2022 forecast sales). That represents an upside of 89% over the recent $12.7 billion market value, giving OPEN stock a target price of $39.69 per share.

All told, this stock is worth somewhere between $29.80 and $39.69. The average of these two estimates is $34.74, or about 65% higher.

What to Do with OPEN Stock

Opendoor is on a growth tear that should end up pushing the stock much higher. My best estimate is somewhere between 42% and 65% higher.

I am not the only one who thinks this way about OPEN. For example, Tipranks shows four analysts with an average price target of $35. That suggests an upside of 67% over the Sept. 27 close price.

Other analyst survey sites have high price targets as well. For example, Yahoo! Finance reports five analysts with an average target of $31.20, or 48.6% higher. Likewise, Seeking Alpha shows seven analysts with a target price of $32.67, or 55.6% higher. All of these targets are similar to mine and suggest OPEN stock has a good deal more upside.

So, despite the rise of the stock so far, existing shareholders can still make money staying long. Given that OPEN is worth at least 42% more, there is also a good opportunity for buyers here. New investors who are growth-oriented and willing to take on risks have a good chance of making money with this stock.

On the date of publication, Mark R. Hake did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the Publishing Guidelines.

Mark Hake writes about personal finance on and runs the Total Yield Value Guide which you can review here.