Opendoor Technologies Is a Better Bet Than Zillow

Stocks to buy

Opendoor Technologies (NASDAQ:OPEN) stock is still very undervalued when compared to Zillow (NASDAQ:Z), its main competitor in online real estate sales and purchases.


The company recently produced its year-end results and I am able to update my analysis of OPEN stock. I found that the stock is at least 46% undervalued when compared with comp metrics.

In my last article on Opendoor stock on Jan. 20, I showed that Opendoor stock was worth much more. I estimated that OPEN stock was worth $40.83, or 55% above its price then.

My updated analysis is that Opendoor stock is still worth roughly that amount at $39.83, or 46% above today’s price. This article will describe how I came up with this revised valuation for OPEN stock.

Opendoor’s Market and Enterprise Values

Opendoor stock has risen over 19% since the beginning of the year. But is more or less flat to slightly down from when I last wrote up the stock in late January. Zillow (NASDAQ:Z), its main competitor in online real estate, is up less than 1% year-to-date.

Opendoor did not provide any kind of projection for its 2021 sales or even whether it would meet its projections shown in its premerger presentation. But it did indicate that Q1 sales will be up an astounding 146% over its prior quarter Q4 2020 sales at the midpoint.

Moreover, Opendoor said that there would be a “return to sequential revenue growth across existing markets with strong and increasing demand.” In other words, the company might reach profitability this year, at least on an adjusted EBITDA basis.

Opendoor now has a market capitalization of $15.6 billion. In addition, the company has $1.37 billion in net cash, plus $770 million in new cash from a recent equity capital raise. That brings total net cash to $2.14 billion. After deducting this from the market value, Opendoor’s enterprise value is $13.47 billion.

Using Zillow’s Comp Values

Analysts covered by Seeking Alpha estimate that 2021 and 2022 sales will be $4.03 billion and $7.27 billion. This gives the company a forward EV-sale multiple of 3.34 and 1.85 for each year.

Next, we can compare these ratios with those from Zillow. Zillow has an equity market value of $36.68 billion. Since it has net cash of $1.637 billion its enterprise value (EV) is $35.043 billion.

Moreover, Zillow’s sales for the next two years, according to Seeking Alpha, are $5.46 billion and $8.04 billion. Therefore, we can divide $35 billion by these numbers to derive its EV-sales multiples.

The EV-sales ratios for Zillow are 6.42x 2021 sales and 4.36x 2022 sales. If we apply these ratios to Opendoor Technologies sales, the resulting EV values undervalue OPEN stock by 47.9% for 2021 and 57.5% for 2022.

The average is 52.7%, giving Opendoor an EV value of $20.569 billion. After adding back the cash, the target market value is $22.7 billion. This implies a target price of $39.83 per share, assuming 570.1 million shares outstanding.

What To Do With OPEN Stock

This $39.83 target price for OPEN stock represents a potential gain of 46% over today’s price. The target price could easily rise if the company produces higher sales than analysts forecast. Once Opendoor becomes profitable, we can compare the two companies’ profitability as well.

In addition, the market is likely to afford Opendoor Technologies a higher valuation given its faster top-line growth rate. For example, analysts expect Opendoor’s sales to rise 181% over the next two years versus 141% for Zillow.

Other analysts seem to agree. For example, reports that five analysts who have written about OPEN stock in the last three months have an average target of $35.75. By contrast, their survey of analysts for Zillow stock is for an average target of $177.75, a lower gain of 33%.

The enterprising investor might want to see when and if Opendoor Technologies will become profitable. But at least until then, the comp-based price target compared to Zillow implies a potential 46% gain to $39.83 per share.

On the date of publication, Mark R. Hake did not hold a long or short position in any of the securities in this article.

Mark Hake writes about personal finance on and runs the Total Yield Value Guide which you can review here.