What Happened?
A number of stocks fell in the afternoon session after the latest U.S. consumer confidence report revealed underlying weakness despite a headline increase, raising concerns about future spending.
While the Conference Board's headline Consumer Confidence Index rose to 97.2 in July, the details painted a more cautious picture for investors. The Present Situation Index, a measure of consumers' assessment of current business and labor market conditions, actually fell. More telling for the sector, the report showed a decline in buying intentions for major discretionary items such as homes, cars, and most appliances. This combination of factors signals potential weakness in future consumer spending, casting a shadow over companies that rely on non-essential purchases.
The stock market overreacts to news, and big price drops can present good opportunities to buy high-quality stocks.
Among others, the following stocks were impacted:
- Specialized Consumer Services company 1-800-FLOWERS (NASDAQ: FLWS) fell 6.5%. Is now the time to buy 1-800-FLOWERS? Access our full analysis report here, it’s free.
- Real Estate Services company Offerpad (NYSE: OPAD) fell 12.3%. Is now the time to buy Offerpad? Access our full analysis report here, it’s free.
- Education Services company Universal Technical Institute (NYSE: UTI) fell 3.1%. Is now the time to buy Universal Technical Institute? Access our full analysis report here, it’s free.
- Real Estate Services company Opendoor (NASDAQ: OPEN) fell 11.3%. Is now the time to buy Opendoor? Access our full analysis report here, it’s free.
- Specialized Consumer Services company WeightWatchers (NASDAQ: WW) fell 6.2%. Is now the time to buy WeightWatchers? Access our full analysis report here, it’s free.
Zooming In On Offerpad (OPAD)
Offerpad’s shares are extremely volatile and have had 87 moves greater than 5% over the last year. But moves this big are rare even for Offerpad and indicate this news significantly impacted the market’s perception of the business.
The previous big move we wrote about was 11 days ago when the stock dropped 5.5% as reports revealed sluggish market conditions and elevated mortgage rates.
The stock's decline coincided with the release of data and commentary pointing to a challenging environment for the U.S. housing market. Reports indicated that high interest rates continued to weigh on demand and affordability.
One report noted that 38% of home builders cut prices in July to attract buyers, the highest rate since 2022. This news created a difficult backdrop for iBuyers like Offerpad, which purchase homes directly from sellers with the intent to renovate and resell them. A slowing market with high financing costs can pressure the profitability of this business model.
Offerpad is down 45.9% since the beginning of the year, and at $1.45 per share, it is trading 71.2% below its 52-week high of $5.04 from December 2024. Investors who bought $1,000 worth of Offerpad’s shares at the IPO in December 2020 would now be looking at an investment worth $9.49.
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