UPDATE: Opendoor Technologies (OPEN) Initiated at Outperform as Credit Suisse Massive Market Share Expansion Opportunity
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Credit Suisse analyst Yoni Yadgaran initiates coverage on Opendoor Technologies (NASDAQ: OPEN) with a Outperform rating and a price target of $37.00 on the belief that the company's core offering solves major pain point for home sellers at a compelling price. OPEN’S primary offering provides an online alternative to the traditional experience of listing a home for sale by allowing a homeowner to directly sell their home to OPEN for a pre-determined price – providing: an instant offer with expedited closing times (~3 days vs.
~90 under traditional model), convenience (via automation/digitized experience), and flexibility, in exchange for a service fee (6% - 9%) that is modestly higher than the traditional agent commission fee structure (5% - 6%) in the traditional home listing model.
The analyst stated "Less than ~1% of management’s estimated $1.3 trillion U.S. residential real estate TAM is currently bought or sold online. This compares to broader mid-teens penetration within consumer retail and mid-single-digit penetration in categories such as home services, car buying, and rideshare. For context, Opendoor’s top six markets, which operated at a ~$2.7 billion revenue run rate as of 1Q20, estimated market share reached an average of ~3.2%, with local share reaching as high as 5.5% (Raleigh; $388 million run-rate), 4.6% (Atlanta; $664 million runrate), and 4.2% (Phoenix; $1 billion run-rate) in its three largest markets." The $37 target price is based on a DCF assuming a WACC of 11.5% and a
terminal growth rate of 3%.
Shares of Opendoor Technologies closed at $28.02 yesterday.
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