Opendoor (OPEN) Stock Soars on Zillow Deal

This partnership comes after a somewhat bumpy start to the week. Opendoor was fined $62 million by the Federal Trade Commission (FTC) after it claimed the company was misleading customers “into believing they could make more money selling their home to Opendoor than on the open market using the traditional sales process”.

Now, after years of competition, Opendoor Technologies and Zillow are teaming up to make the process of buying or selling homes easier.

The deal will allow people selling their homes on Zillow to request an instant cash offer from Opendoor. From there, the seller can either accept the Opendoor offer or combine it with other Zillow offers, such as financing, closing, and agent selection.

From Opendoor President Andrew Low Ah Kee:

“At Opendoor, we strive to transform what is often considered one of life’s most stressful times — moving — into a simple, certain, and fast e-commerce experience. By bringing together Zillow’s market-leading audience and Opendoor’s e-commerce platform, more consumers will have the opportunity to sell to Opendoor and spare themselves the stress and uncertainty of a traditional sales process.

Zillow is currently valued at around $9 billion, while OPEN shares command a market capitalization of over $3.9 billion.

Impact on earnings on OPEN shares

Both Zillow and OPEN shares peaked in the first quarter of 2021. Additionally, both stocks are down more than 80% since those highs. That’s even while Opendoor is up more than 20% so far on Friday and more than 32% from its May low. Notably, the stock never hit new lows in June, even though major US indexes did.

As stocks rallied on the deal with Zillow, the earnings report was mixed. The company posted revenue of $4.2 billion, up 250% year-over-year and slightly above forecast of $10 million. However, the company lost 9 cents per share as analysts expected a profit of 3 cents per share.

Also, the tips were really disappointing. Management expects third-quarter sales of $2.2 billion to $2.6 billion. That’s a far cry from consensus expectations calling for sales of $4.26 billion. When we go through the transcript, the director explains:

“Our revenue forecast is between $2.2 billion and $2.6 billion, reflecting expectations for fewer homes sold in the quarter given a slower resale pace, as well than the impact of a slower pace of acquisition which subsequently has an impact on resale volumes.”

OPEN stock is facing multi-month resistance and the 50-day moving average. However, investors should remember that it is still down 85% from the highs. If it can break through the $5.80-$6 zone, stocks could continue to rise.

As of the date of publication, Bret Kenwell had (neither directly nor indirectly) any position in the securities mentioned in this article. The opinions expressed in this article are those of the author, subject to InvestorPlace.com publishing guidelines.