Can Opendoor's Contribution Margins Withstand Housing Headwinds?

Opendoor Technologies Inc. OPEN 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, Exodus Movement, Inc. EXOD and EverCommerce Inc. EVCM have gained 28.9%, 8.7% and 2.1%, respectively.

OPEN One-Month Price Performance

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.

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.

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.

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This article originally published on Zacks Investment Research (zacks.com).

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