Shares of Opendoor Technologies Inc (NASDAQ: OPEN) plummeted 16.01% in pre-market trading on Friday, following the release of disappointing third-quarter earnings results and a weak fourth-quarter outlook. The significant drop comes as the real estate technology company's performance fell short of analyst expectations, despite its new CEO's ambitious plans to pivot towards artificial intelligence and software.
Opendoor reported a quarterly loss of $0.12 per share for Q3, missing the analyst consensus estimate of $0.07 by a considerable margin. This represents a wider loss compared to the $0.11 per share loss in the same period last year. While the company's quarterly revenue of $915 million surpassed analyst estimates of $849.588 million, it still showed a substantial 33.55% year-over-year decrease from $1.377 billion in the previous year.
Adding to investor concerns, Opendoor provided a weak outlook for the fourth quarter, expecting revenue to decrease by approximately 35% quarter-over-quarter. The company cited low inventory levels from the third quarter's reduced inventory volumes as the primary reason for the projected decline. This guidance suggests ongoing challenges in the real estate market and raised doubts about Opendoor's near-term growth prospects.
Despite the disappointing results, newly appointed CEO Kaz Nejatian outlined a bold strategy to reposition Opendoor as a "software and AI company." Nejatian stated, "We are refounding Opendoor as a software and AI company. In my first month as CEO, we've made a decisive break from the past - returning to the office, eliminating reliance on consultants, and launching over a dozen AI-powered products and features that demonstrate our renewed velocity." The CEO emphasized that software and AI will chart a path to profitability for Opendoor, enabling the company to transact with more sellers, improve unit economics, and drive operational efficiency.
In a separate announcement, Opendoor revealed plans for a special dividend distribution of warrants to shareholders, set to take place on November 18. For every 30 shares owned, holders will receive one warrant of each series - K, A, and Z, with exercise prices set at $9, $13, and $17, respectively. While this move may be intended to reward shareholders, it did little to offset the negative sentiment surrounding the earnings report.
As Opendoor continues its transition under new leadership and attempts to leverage AI and software to revitalize its business model, investors remain skeptical about the company's ability to navigate the challenging real estate market conditions in the near term. The pre-market plunge reflects these concerns and suggests that the market will be closely watching Opendoor's performance in the coming quarters to assess the effectiveness of its new strategy.