August’s CPI (Consumer Price Index) climbed higher than the estimates, rising 0.1% sequentially and 8.3% year-over-year. In its efforts to battle rampant inflation, the Fed announced a third consecutive 75 basis point rate hike last month.
The persistently high inflation has led to the Fed raising its key rate estimates for 2022. The central bank officials now predict the key rate to end this year at 4.5% to 4.75%, up from the previously predicted 3.25% to 3.5% in June.
The Fed’s hawkish stance has meant that the borrowing cost has increased. Interest rates have risen in tandem with inflation. The rate hikes have dampened the housing market by making loans unaffordable for home buyers.
With further rate hikes expected in the upcoming months, the housing demand might take a hit. Thus, it could be wise to avoid fundamentally weak real estate services stocks Opendoor Technologies Inc. (OPEN) and Redfin Corporation (RDFN).
Opendoor Technologies Inc. (OPEN)
OPEN operates a digital platform for residential real estate in the United States. Its platform enables consumers to buy and sell homes online.
On September 22, 2022, stockholder rights law firm Bragar Eagel & Squire, P.C., announced that it had started investigating potential claims against OPEN on behalf of the company’s stockholders.
OPEN’s operating expenses increased 46% year-over-year to $454 million for the second quarter that ended June 30, 2022. The company’s net loss and loss per share came in at $54 million and $0.09, respectively. Its total liabilities came in at $7.78 billion, compared to $7.25 billion for the fiscal year ended December 31, 2022.
Analysts expect OPEN’s EPS for the quarter that ended September 30, 2022, to remain negative. Its revenue for the quarter ending December 31, 2022, is expected to decline 26.5% year-over-year to $2.81 billion. Over the past year, the stock has declined 84.8% to close the last trading session at $2.99.
OPEN’s weak prospects are reflected in its POWR Ratings. It has an overall F rating, equating to a Strong Sell in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.
It has an F grade for Stability, Sentiment, and Quality and a D for Growth and Momentum. It is ranked #38 out of 40 stocks in the D-rated Real Estate Services industry. Click here to see the rating of OPEN for Value.
Redfin Corporation (RDFN)
RDFN operates as a residential real estate brokerage company in the United States and Canada. The company operates an online real estate marketplace and provides real estate services, including assisting individuals in purchasing or selling homes. It also provides title and settlement services, originates and sells mortgages, and buys and sells homes.
For the fiscal second quarter that ended June 30, 2022, RDFN’s gross profit declined 6% year-over-year to $118 million. The company’s adjusted EBITDA loss came in at $28.60 million, compared to an adjusted EBITDA of $2.80 million in the year-ago period. Also, its net loss widened 180.3% year-over-year to $78.14 million.
For the quarter that ended September 30, 2022, RDFN’s EPS is expected to remain negative. Its revenue for the quarter ending December 31, 2022, is expected to decline 10.8% year-over-year to $573.86 million. Over the past year, the stock has fallen 87.9% to close the last trading session at $5.80.
RDFN’s POWR Ratings reflect this bleak outlook. The stock has an overall F rating, equating to a Strong Sell in our proprietary rating system.
It has an F grade for Growth, Sentiment, and Quality and a D for Stability. It is ranked #39 in the same industry. To see the other ratings of RDFN for Value and Momentum, click here.
OPEN shares were trading at $2.82 per share on Friday afternoon, down $0.17 (-5.69%). Year-to-date, OPEN has declined -80.70%, versus a -22.70% rise in the benchmark S&P 500 index during the same period.
About the Author: Dipanjan Banchur
Since he was in grade school, Dipanjan was interested in the stock market. This led to him obtaining a master’s degree in Finance and Accounting. Currently, as an investment analyst and financial journalist, Dipanjan has a strong interest in reading and analyzing emerging trends in financial markets.
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