Opendoor (OPEN)

Technology real estate company Opendoor (NASDAQ:OPEN) reported Q3 CY2025 results topping the market’s revenue expectations, but sales fell by 33.6% year on year to $915 million. Its GAAP loss of $0.12 per share was 68.5% below analysts’ consensus estimates.

Company Overview

Founded by real estate guru Eric Wu, Opendoor (NASDAQ:OPEN) offers a technology-driven, convenient, and streamlined process to buy and sell homes.

Technology has been a double-edged sword in real estate services. On the one hand, internet listings are effective at disseminating information far and wide, casting a wide net for buyers and sellers to increase the chances of transactions. On the other hand, digitization in the real estate market could potentially disintermediate key players like agents who use information asymmetries to their advantage.

Opendoor's primary competitors include Zillow (NASDAQ:ZG), Redfin (NASDAQ:RDFN), Offerpad Solutions (NYSE:OPAD), and eXp World (NASDAQ:EXPI).

A company’s long-term sales performance can indicate its overall quality. Any business can put up a good quarter or two, but many enduring ones grow for years. Over the last five years, Opendoor grew its sales at a sluggish 5.6% compounded annual growth rate. This was below our standard for the consumer discretionary sector and is a poor baseline for our analysis.

Long-term growth is the most important, but within consumer discretionary, product cycles are short and revenue can be hit-driven due to rapidly changing trends and consumer preferences. Opendoor’s performance shows it grew in the past but relinquished its gains over the last two years, as its revenue fell by 27.3% annually.

We can better understand the company’s revenue dynamics by analyzing its number of homes sold, which reached 2,568 in the latest quarter. Over the last two years, Opendoor’s homes sold averaged 16.2% year-on-year declines. Because this number is higher than its revenue growth during the same period, we can see the company’s monetization has fallen.

This quarter, Opendoor’s revenue fell by 33.6% year on year to $915 million but beat Wall Street’s estimates by 7.8%.

Looking ahead, sell-side analysts expect revenue to decline by 23% over the next 12 months. Although this projection is better than its two-year trend, it’s hard to get excited about a company that is struggling with demand.

Operating margin is a key measure of profitability. Think of it as net income - the bottom line - excluding the impact of taxes and interest on debt, which are less connected to business fundamentals.

Opendoor’s operating margin has been trending up over the last 12 months, but it still averaged negative 5.9% over the last two years. This is due to its large expense base and inefficient cost structure.

Opendoor’s operating margin was negative 7.4% this quarter. The company's consistent lack of profits raise a flag.

We track the long-term change in earnings per share (EPS) for the same reason as long-term revenue growth. Compared to revenue, however, EPS highlights whether a company’s growth is profitable.

Although Opendoor’s full-year earnings are still negative, it reduced its losses and improved its EPS by 33.6% annually over the last five years. The next few quarters will be critical for assessing its long-term profitability.

In Q3, Opendoor reported EPS of negative $0.12, down from negative $0.11 in the same quarter last year. This print missed analysts’ estimates. Over the next 12 months, Wall Street expects Opendoor to improve its earnings losses. Analysts forecast its full-year EPS of negative $0.44 will advance to negative $0.36.

If you’ve followed StockStory for a while, you know we emphasize free cash flow. Why, you ask? We believe that in the end, cash is king, and you can’t use accounting profits to pay the bills.

While Opendoor posted positive free cash flow this quarter, the broader story hasn’t been so clean. Over the last two years, Opendoor’s demanding reinvestments to stay relevant have drained its resources, putting it in a pinch and limiting its ability to return capital to investors. Its free cash flow margin averaged negative 2.1%, meaning it lit $2.08 of cash on fire for every $100 in revenue.

Opendoor’s free cash flow clocked in at $432 million in Q3, equivalent to a 47.2% margin. This result was good as its margin was 43.1 percentage points higher than in the same quarter last year, but we wouldn’t read too much into the short term because investment needs can be seasonal, causing temporary swings. Long-term trends carry greater meaning.

As long-term investors, the risk we care about most is the permanent loss of capital, which can happen when a company goes bankrupt or raises money from a disadvantaged position. This is separate from short-term stock price volatility, something we are much less bothered by.

Opendoor posted negative $89 million of EBITDA over the last 12 months, and its $1.79 billion of debt exceeds the $1.45 billion of cash on its balance sheet. This is a deal breaker for us because indebted loss-making companies spell trouble.

We implore our readers to tread carefully because credit agencies could downgrade Opendoor if its unprofitable ways continue, making incremental borrowing more expensive and restricting growth prospects. The company could also be backed into a corner if the market turns unexpectedly. We hope Opendoor can improve its profitability and remain cautious until then.

We were impressed by Opendoor’s optimistic EBITDA guidance for next quarter, which blew past analysts’ expectations. We were also glad its revenue outperformed Wall Street’s estimates. On the other hand, its EPS and EBITDA whiffed. Overall, this was a mixed quarter. The stock traded down 8.5% to $5.99 immediately after reporting.

Updated: December 4, 2025 at 9:31 PM EST

Before making an investment decision, investors should account for Opendoor’s business fundamentals and valuation in addition to what happened in the latest quarter.

We see the value of companies helping consumers, but in the case of Opendoor, we’re out. For starters, its revenue growth was weak over the last five years, and analysts expect its demand to deteriorate over the next 12 months. On top of that, Opendoor’s number of homes purchased has disappointed, and its Forecasted free cash flow margin suggests the company will ramp up its investments next year.

Opendoor’s forward price-to-sales ratio is 1.2x. The market typically values companies like Opendoor based on their anticipated profits for the next 12 months, but it expects the business to lose money. We also think the upside isn’t great compared to the potential downside here - there are more exciting stocks to buy.

Wall Street analysts have a consensus one-year price target of $2.99 on the company (compared to the current share price of $7.55), implying they don’t see much short-term potential in Opendoor.