Opendoor Technologies Inc. (NASDAQ: OPEN) saw its shares decline sharply on Wednesday, closing down 8.7% at $3.76, as investors weighed the company's aggressive inventory expansion against its streamlined cost structure. The stock was trading at $3.74 in premarket activity on Thursday.
The company reported second-quarter results that showed a significant build-up in home inventory, with purchases exceeding sales by 2,039 homes. This figure exactly matched the quarterly increase in inventory units, which rose from 3,420 to 5,459 properties. The total inventory value surged by $706 million, a 62% increase quarter-over-quarter, reaching $1.845 billion as of June 30.
While Opendoor's unit economics improved—marketing spend per acquisition contract dropped roughly 80% to about $724, down from $3,699 in the first quarter—the market's reaction suggests that the benefits of cost efficiency were not enough to offset concerns about capital tied up in unsold homes. The company's adjusted EBITDA loss narrowed to $4 million from $31 million in the prior quarter, but the GAAP loss widened to $162 million from $29 million a year earlier.
CFO Christy Schwartz defended the strategy, stating, "We deliberately put capital to work rebuilding a larger, higher quality book." The company financed approximately 70% of its inventory growth since year-end through non-recourse asset-backed debt, which increased by $642 million to $1.762 billion. However, first-half operating cash flow was negative $964 million, with inventory accounting for $932 million of that outflow.
Analysts remain cautious. UBS analyst Stephen Ju reiterated a Neutral rating and reduced his price target to $4.50 from $5.00, implying a 19.7% upside from Wednesday's close. The consensus among seven analysts is a $4.38 average price target, with three Sell ratings, three Holds, and one Buy. The target range spans from $1.40 to $8.00.
The broader housing market continues to face headwinds. Mortgage applications fell 2.9% for the week ended July 31, with purchase applications down 3.6%. The average 30-year fixed mortgage rate rose to 6.81%, the highest in a year. These factors could hamper Opendoor's ability to resell its growing inventory quickly.
For the third quarter, Opendoor expects revenue growth of at least 20% year-over-year, implying a minimum of $1.10 billion based on Q3 2025 revenue of $915 million. The company also projects contribution profit to at least double, with a contribution margin between 4% and 4.5%. Management anticipates stock-based compensation of approximately $110 million in Q3 and remains focused on achieving positive adjusted net income on a 12-month forward basis by year-end.
Peer performance this week shows a mixed picture. Offerpad Solutions (OPAD) fell 7.2% on Wednesday but is up 19.1% for the week. Zillow (Z) dipped 0.5% but rose 6.0% week-to-date, while Rocket Companies (RKT) slipped 1.8% but gained 7.4% for the week.
Investors will be watching Opendoor's acquisition pace and resale velocity in the coming weeks. The company cautions that reported contract totals are subject to cancellation. Risks include elevated mortgage rates increasing carrying costs and potential home price declines leading to inventory write-downs.
