The real estate market has suffered a massive setback during the COVID-19 outbreak, as restrictive measures imposed by the government have led to the closure of business activities and a decline in the need for real estate services. Additionally, the aggressive pace of Fed rate hikes amid ongoing macro conflicts has led to a sharp decline in housing demand.
“Demand has completely dropped. Affordability was already strained by soaring house prices, when you add to that this unprecedented pace of mortgage rates, it compounds the problem,” Greg McBrideBankrate.com’s chief financial analyst, said.
However, on the positive side, the sector’s long-term growth prospects remain strong. Massive digitization and virtual capabilities such as drone videos, 3D tours, and digital home search are expected to contribute to the growth of the global real estate market at a CAGR of 5.2% from 2022 to 2030.
Stock to buy:
Guild Holdings Company (GLD)
GHLD is a mortgage company that originates, sells and services residential mortgages in the United States. It operates approximately 260 branches with licenses in 49 states. The Company originates residential mortgages through retail channels and correspondents.
On October 7, GHLD enhanced its 3-2-1 Home, an innovative mortgage program designed to offer first-time home buyers a down payment option as low as 3%. This should allow the company to open more doors for first-time buyers and expand its customer base.
GHLD net revenue amounted to $261.22 million during the fiscal quarter ended September 30, 2022. Net income attributable to GILD was $77.37 million, while its net earnings per share were $1.26 .
Street expects GHLD’s EPS for the fiscal quarter ending June 2023 to be $0.43, indicating an 88.8% year-over-year increase. The consensus EPS estimate of $1.73 for the year ending December 2023 represents a 31.1% year-over-year increase. The company has also exceeded consensus EPS estimates in three of the last four quarters, which is impressive.
GHLD’s PER multiple of 1.75 is 84.1% lower than the industry average of 11.03. In terms of EV/Futures, the stock is trading at 1.78x, 35.1% below the industry average of 2.74x.
The stock has gained 10.1% over the past month to close its last trading session at $10.02.
GHLD’s strong fundamentals are reflected in its POWR Rankings. The stock has an overall rating of B, which equates to a buy in our proprietary rating system. POWR ratings are calculated by considering 118 separate factors, with each factor weighted to an optimal degree.
GHLD has an A rating for quality and a B for value and sentiment. It is ranked #1 out of 42 stocks in the Real estate services industry.
Beyond what is stated above, we also rated GHLD for Momentum, Growth and Stability. Get all GHLD ratings here.
Stock to avoid:
Opendoor Technologies Inc. (OPEN)
OPEN operates a digital platform for residential real estate in the United States. The company allows customers to buy and sell homes online. In addition, it offers escrow and title insurance services.
OPEN’s total operating expenses were $454 million for the second quarter ended June 30, 2022, up 46% year-over-year. Additionally, its total liabilities were $7.78 billion for the period ended June 30, 2022, compared to $7.26 billion for the period ended December 31, 2021.
OPEN’s revenue is expected to decline 36.4% year-over-year to $2.43 billion for the quarter ending December 2022. Its EPS is expected to fall 177.6% year-on-year on the other to reach $0.86 for the same period.
In terms of last 12 months price/sales, OPEN is currently trading at 0.06x, 98.7% below the industry average of 4.86x. Its trailing 12-month Price/Book multiple of 0.72 is 51.1% below the industry average of 1.47.
The stock has lost 91.4% over the past year and 88.4% since the start of the year to close the last trading session at $1.69.
OPEN’s POWR ratings are consistent with this bleak outlook. It has an overall F rating, which equates to a strong sell in our POWR rating system.
The stock also has an F rating for stability, sentiment and growth and a D for quality and momentum. It is ranked #40 in the same industry.
We also rated OPEN for value. Get all OPEN odds here.
GHLD shares were trading at $10.47 per share on Tuesday afternoon, up $0.45 (+4.49%). Year-to-date, GHLD is down -25.37%, compared to a -15.35% rise in the benchmark S&P 500 over the same period.
About the Author: Komal Bhattar
Komal’s passion for the stock market and financial analysis led her to pursue her career in investment research. Its fundamental approach to stock analysis helps investors identify the best investment opportunities. After…