We use cookies to understand how you use our site and to improve your experience.
This includes personalizing content and advertising.
By pressing "Accept All" or closing out of this banner, you consent to the use of all cookies and similar technologies and the sharing of information they collect with third parties.
You can reject marketing cookies by pressing "Deny Optional," but we still use essential, performance, and functional cookies.
In addition, whether you "Accept All," Deny Optional," click the X or otherwise continue to use the site, you accept our Privacy Policy and Terms of Service, revised from time to time.
You are being directed to ZacksTrade, a division of LBMZ Securities and licensed broker-dealer. ZacksTrade and Zacks.com are separate companies. The web link between the two companies is not a solicitation or offer to invest in a particular security or type of security. ZacksTrade does not endorse or adopt any particular investment strategy, any analyst opinion/rating/report or any approach to evaluating individual securities.
If you wish to go to ZacksTrade, click OK. If you do not, click Cancel.
Can Opendoor's Contribution Margins Withstand Housing Headwinds?
Read MoreHide Full Article
Key Takeaways
Opendoor's Q2 contribution profit hit $69M with a 4.4% margin, down from 6.3% last year.
Management guides Q3 margins at 2.8-3.3%, with Q4 pressured by older home resales.
Cash Plus and agent-driven listings aim to cut capital intensity and lift profitability.
Opendoor Technologies Inc. (OPEN - Free Report) is placing emphasis on profitability discipline as contribution margins emerge as a central focus of its business model transition. In the second quarter, the company reported a contribution profit of $69 million, translating to a 4.4% margin — down from 6.3% reported in the prior year. Management attributed the decline primarily to an unfavorable resale mix weighted toward older, lower-margin homes.
While OPEN’s second-quarter revenues of $1.57 billion marked a 3.7% increase year over year, the margin erosion underscored the challenge of balancing disciplined underwriting with capital efficiency. Management emphasized that first-half results benefited from heavier marketing spend and proactive inventory acquisitions ahead of the spring selling season. However, persistently high mortgage rates suppressed buyer demand, leading to weaker clearance rates and reinforcing the need for wider spreads and slower acquisition pacing.
Looking forward, management guided to margin compression in the back half of the year. Opendoor expects third-quarter contribution margins to range between 2.8% and 3.3%, and fourth-quarter performance to be pressured by the resale of older inventory. Management acknowledged that its goal of year-over-year margin improvement will likely be out of reach, reflecting both macro headwinds and transitional effects tied to the rollout of its distributed platform.
Despite near-term headwinds, the company pointed to its expanding product suite as a longer-term margin stabilizer. Initiatives such as Cash Plus — which provides sellers upfront liquidity along with resale participation and agent-driven listings — are designed to reduce capital intensity, mitigate downside risk and generate higher-margin, capital-light revenue streams. While contribution margins remain under pressure in the current environment, Opendoor framed its platform shift as the foundation for more durable and scalable profitability in the years ahead.
Shares of Opendoor have rallied 56.1% in the past month compared with the industry’s growth of 5.7%. In the same time frame, other industry players like Chegg, Inc. (CHGG - Free Report) , Exodus Movement, Inc. (EXOD - Free Report) and EverCommerce Inc. (EVCM - Free Report) have gained 28.9%, 8.7% and 2.1%, respectively.
OPEN One-Month Price Performance
Image Source: Zacks Investment Research
From a valuation standpoint, OPEN trades at a forward price-to-sales (P/S) multiple of 1.01X, significantly below the industry’s average of 5.91X. Conversely, industry players, such as Chegg, Exodus and EverCommerce, have P/S multiples of 0.48X, 6.55X and 3.42X, respectively.
Image Source: Zacks Investment Research
The Zacks Consensus Estimate for OPEN’s 2025 loss per share has widened from 21 cents to 24 cents in the past 60 days. This reflects weakening analyst sentiment and diminished confidence in the stock’s near-term outlook.
Image Source: Zacks Investment Research
The company is likely to report strong earnings, with projections indicating a 35.1% rise in 2025. Conversely, industry players like Chegg and Exodus are likely to witness a fall of 114.7% and 52.2%, respectively, year over year in 2025 earnings. Meanwhile, EverCommerce’s earnings in 2025 are expected to surge 131.8% year over year.
Image: Shutterstock
Can Opendoor's Contribution Margins Withstand Housing Headwinds?
Key Takeaways
Opendoor Technologies Inc. (OPEN - Free Report) is placing emphasis on profitability discipline as contribution margins emerge as a central focus of its business model transition. In the second quarter, the company reported a contribution profit of $69 million, translating to a 4.4% margin — down from 6.3% reported in the prior year. Management attributed the decline primarily to an unfavorable resale mix weighted toward older, lower-margin homes.
While OPEN’s second-quarter revenues of $1.57 billion marked a 3.7% increase year over year, the margin erosion underscored the challenge of balancing disciplined underwriting with capital efficiency. Management emphasized that first-half results benefited from heavier marketing spend and proactive inventory acquisitions ahead of the spring selling season. However, persistently high mortgage rates suppressed buyer demand, leading to weaker clearance rates and reinforcing the need for wider spreads and slower acquisition pacing.
Looking forward, management guided to margin compression in the back half of the year. Opendoor expects third-quarter contribution margins to range between 2.8% and 3.3%, and fourth-quarter performance to be pressured by the resale of older inventory. Management acknowledged that its goal of year-over-year margin improvement will likely be out of reach, reflecting both macro headwinds and transitional effects tied to the rollout of its distributed platform.
Despite near-term headwinds, the company pointed to its expanding product suite as a longer-term margin stabilizer. Initiatives such as Cash Plus — which provides sellers upfront liquidity along with resale participation and agent-driven listings — are designed to reduce capital intensity, mitigate downside risk and generate higher-margin, capital-light revenue streams. While contribution margins remain under pressure in the current environment, Opendoor framed its platform shift as the foundation for more durable and scalable profitability in the years ahead.
OPEN’s Stock Price Performance, Valuation & Estimates
Shares of Opendoor have rallied 56.1% in the past month compared with the industry’s growth of 5.7%. In the same time frame, other industry players like Chegg, Inc. (CHGG - Free Report) , Exodus Movement, Inc. (EXOD - Free Report) and EverCommerce Inc. (EVCM - Free Report) have gained 28.9%, 8.7% and 2.1%, respectively.
OPEN One-Month Price Performance
Image Source: Zacks Investment Research
From a valuation standpoint, OPEN trades at a forward price-to-sales (P/S) multiple of 1.01X, significantly below the industry’s average of 5.91X. Conversely, industry players, such as Chegg, Exodus and EverCommerce, have P/S multiples of 0.48X, 6.55X and 3.42X, respectively.
Image Source: Zacks Investment Research
The Zacks Consensus Estimate for OPEN’s 2025 loss per share has widened from 21 cents to 24 cents in the past 60 days. This reflects weakening analyst sentiment and diminished confidence in the stock’s near-term outlook.
Image Source: Zacks Investment Research
The company is likely to report strong earnings, with projections indicating a 35.1% rise in 2025. Conversely, industry players like Chegg and Exodus are likely to witness a fall of 114.7% and 52.2%, respectively, year over year in 2025 earnings. Meanwhile, EverCommerce’s earnings in 2025 are expected to surge 131.8% year over year.
OPEN stock currently has a Zacks Rank #4 (Sell).
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.