Opendoor Technologies Inc. (OPEN) shares edged higher in pre-market trading Wednesday, reaching $4.78 by 6:00 a.m. ET. This follows a 3% gain in Tuesday's session, where the stock closed at $4.75 on volume of 63.69 million shares. The pre-market activity comes as investors digest key housing data and await the Federal Reserve's interest rate decision later today.
The U.S. housing market continues to face headwinds, with single-family housing starts falling 1.9% in May to an annualized pace of 882,000 units. Overall housing starts dropped 15.4% to their lowest level in six years, according to Reuters. This data underscores the challenges for Opendoor's business model, which relies on buying and selling homes in a market constrained by elevated mortgage rates and weak homebuilding activity.
Investors are closely watching the Federal Reserve's policy announcement, expected later Wednesday. The central bank is widely anticipated to hold its key interest rate steady at 3.50%-3.75%. Persistent high mortgage rates continue to dampen housing demand, affecting companies like Opendoor that are sensitive to borrowing costs and home turnover.
Opendoor is set to join the Russell 3000 Index after the U.S. market close on June 26. This index inclusion could prompt passive fund managers to adjust their holdings, potentially boosting demand for the stock. The Nasdaq will remain open Wednesday, with the next market closure scheduled for Friday, June 19, in observance of Juneteenth.
The company reported first-quarter revenue of $720 million, down from $1.15 billion in the same period last year. Net loss for the quarter was $173 million, while adjusted EBITDA came in at a loss of $31 million. For the second quarter, Opendoor expects revenue to climb about 25% from the first quarter and projects adjusted EBITDA to be near breakeven. “The machine is working,” CEO Kaz Nejatian said in the earnings release.
Opendoor faces significant risks if mortgage rates remain elevated or home prices decline, which could pressure its purchase volumes, resale pace, and margins. Sal Guatieri, senior economist at BMO Capital Markets, told Reuters there is “little indication” of a near-term rebound in U.S. homebuilding. The company has also highlighted housing downturns, limits on debt financing, and difficulties reselling homes as key risk factors in its filings.
In a cost-cutting move, Opendoor plans to shut down its India operations, laying off all 250 employees there. The company is shifting its focus to artificial intelligence and consolidating operations closer to its U.S. customer base. This strategic pivot aims to improve efficiency amid a challenging housing market.
