Opendoor Technologies Stock Drops Amid Rising Interest Rates

Stocks of Opendoor Technologies (OPEN) observed a notable decline, with shares decreasing by 8.29% due to robust economic figures leading to diminished prospects of an interest rate cut by the Federal Reserve.

The downturn in Opendoor's stock price coincides with an uptick in Treasury yields and mortgage rates. This movement follows the Fed's recent decision on rates and subsequent commentary, coupled with a strong jobs report released last Friday.

As reported, the company's stock plunged by 8.5% by 3:04 p.m. ET.

The Impact of Mortgage Rates on Opendoor

Opendoor, whose business model revolves around purchasing and selling homes, is highly sensitive to fluctuations in interest rates. The company benefits from declining mortgage rates as they usually result in higher home prices. Conversely, increasing rates generally exert the contrary effect, pushing home prices down.

The interest-sensitive nature of Opendoor's business was underscored by the rise in the yield on the 10-year Treasury note, which went up by 3.25% to settle at 4.16%, an apex not seen since mid-December. Simultaneously, the average rate for a 30-year fixed mortgage escalated to 7.04%, which is the highest it's been since December.

The current mortgage rates hold particular significance for Opendoor due to the impending peak home-buying season in spring, when elevated rates could dampen buyer demand.

Looking Ahead for Opendoor

Going forward, Opendoor's stock performance is expected to remain closely aligned with interest rate trends, which has been the case for several months. Investors are turning their attention to Opendoor's fourth-quarter earnings report due next Thursday. The report will provide insight on the impact of the company's recent cost-cutting measures and the state of the housing market on its operations.

Market analysts anticipate a significant 71.1% drop in the company's revenue to $826.4 million, reflecting a reduction in its home-buying activities. However, they also expect the adjusted loss per share to improve, moving from $0.63 to $0.18.

It is likely that following the earnings report, Opendoor's stock will continue its history of volatility. Given the various potential outcomes for the company, investors should brace for possible price swings in response to the new data.

Openddoor, Stocks, InterestRates