OPAD - Offerpad Solutions cut to Neutral at J.P. Morgan on inadequate home acquisition volume

2023-03-08 09:09:34 ET

J.P. Morgan on Wednesday downgraded shares of Offerpad Solutions ( NYSE: OPAD ) to Neutral from Overweight as the iBuying company's projected pace of home acquisitions for the second quarter is not adequate to meet consensus estimates. The stock slid as much as 6.7% in premarket trading.

"We believe 2Q will mark the first quarter where the impact of legacy homes will be largely gone," analyst Dae Lee wrote in a note to clients.

For Q2, he's forecasting OPAD's revenue to come in around 55% lower Q/Q at $238M, driven by 675 homes sold and $352K revenue per home sold, the note said. That's ~50% below the Wall Street consensus.

By comparison, Offerpad ( OPAD ) purchased 539 homes in Q4 and expects lower acquisition volume in Q1 before boosting the pace in Q2.

"But we think a much more significant jump in activities is needed to meet consensus expectations for 2Q," Lee contended, adding "the likelihood of such acceleration seems low to us since macro data suggests real estate activities should remain depressed N-T & OPAD has narrowed the scope of homes considered."

The Neutral rating aligns with the Quant system rating of Hold and disagrees with the average analyst rating of Buy.

In December, KBW downgraded Offerpad to Underperform on an expected slump in its book value.

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