Rising interest rates are bad news for these 2 stocks

The August CPI (consumer price index) beat estimates, rising 0.1% sequentially and 8.3% year-on-year. In its effort to combat runaway inflation, the Fed last month announced a third straight rate hike of 75 basis points.

Persistently high inflation has led the Fed to raise its policy rate estimate for 2022. Central bank officials now expect the policy rate to end this year between 4.5% and 4.75%, up from 3 .25% previously expected to 3.5% in June.

The Fed’s hawkish stance has driven up the cost of borrowing. Interest rates have risen in line with inflation. Rate hikes have dampened the housing market by making loans unaffordable for homebuyers.

With further rate hikes expected in the coming months, housing demand could suffer. So, it might 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 allows consumers to buy and sell homes online.

On September 22, 2022, law firm Bragar Eagel & Squire, PC, announced that it had begun investigating potential claims against OPEN on behalf of the company’s shareholders.

OPEN exploitation charges increased 46% year-over-year to $454 million for the second quarter ended June 30, 2022. The company’s net loss and loss per share were $54 million and 0 $.09, respectively. Its total liabilities were $7.78 billion, compared to $7.25 billion for the year ended December 31, 2022.

Analysts expect OPEN’s EPS for the quarter 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 fallen 84.8% to close the last trading session at $2.99.

OPEN’s weak prospects are reflected in its POWR Rankings. It has an overall F rating, which equates to a strong sell in our proprietary rating system. POWR ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.

It has an F rating for stability, sentiment and quality and a D for growth and momentum. It is ranked No. 38 out of 40 stocks in the D rating Real estate services industry. Click here to see the OPEN note for the value.

Redfin Company (RDFN)

RDFN operates as a residential real estate brokerage firm in the United States and Canada. The Company operates an online real estate marketplace and provides real estate services, including helping individuals buy or sell homes. It also provides securities and settlement services, issues and sells mortgages, and buys and sells homes.

For the second fiscal quarter that ended June 30, 2022, RDFN’s gross profit decreased 6% year-over-year to $118 million. The company’s adjusted EBITDA loss was $28.60 million, compared to an adjusted EBITDA of $2.80 million in the same period last year. Additionally, its net loss increased 180.3% year over year to $78.14 million.

For the quarter 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 POWR ratings reflect this bleak outlook. The stock has an overall F rating, which equates to a strong sell in our proprietary rating system.

It has an F rating for growth, sentiment and quality and a D for stability. It is ranked No. 39 in the same industry. To see other RDFN notations 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 is down -80.70%, compared to a -22.70% rise in the benchmark S&P 500 over the same period.

About the Author: Dipanjan Banchur

Ever since he was in elementary school, Dipanjan had been interested in the stock market. This enabled him to obtain a master’s degree in finance and accounting. Currently, as an investment analyst and financial journalist, Dipanjan is particularly interested in reading and analyzing emerging trends in financial markets. After…

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