Better Home (BETR) stock price has plunged: Don’t buy the dip yet

Better Home & Finance (NASDAQ: BETR) stock price has been in a freefall in the past few days as demand for the mortgage company slumped. The shares plunged to a low of $0.80 this week and has now popped by over 10% in the premarket.

Better Home & Finance earnings

Better is a company that became popular for all the wrong reasons in 2022. The company trended after the CEO, Vishal Garg, fired its 900 employees during a one-way Zoom call.

After months of managing the crisis, the company quietly went public recently after merging with Aurora, a blank-check company. Today, Better, which was once a unicorn, has seen its market cap drop to about $690 million.

The SPAC merger unlocked fresh capital for the company. It now has ~$565 million in capital. These funds include a $528 million convertible note and common equity.

Better recently published its first-half results that provided more color about its business. The results revealed that its revenue came in at $51.1 million in the first half of the year. $21.1 million of these revenues came in the second quarter.

Better is currently a home incinerator that is burning millions of dollars every quarter. Its net loss for the first half came in at $135.4 million while its adjusted EBITDA loss was over $82.8 million. 

The company’s weak performance are a reflection of the difficult macro environment it is operating in. Interest rates in the US have surged and pushed mortgage rates to more than 7.20%, the highest level in more than 20 years. In his statement, Vishal Garg said:

“In the first half of 2023, through a very challenging market environment, we have continued to invest in our proprietary technology platform, Tinman, and our One-Day Mortgage offerings to improve customer experience and fulfillment efficiency.”

Is Better stock a good investment?

Better Homes & Finance is going through a rough patch as the housing market remains under pressure. The biggest challenge is that mortgage rates have surged in the past few months and the trend will likely continue.

Therefore, I suspect that the Better stock price will continue struggling in the coming months. Besides, the company will continue making substantial losses for a while.

In the long run, however, I suspect that Better share price will bounce back because of its strong reputation among its customers. Also, economists believe that interest rates will start falling in 2024.

As such, I recommend staying away from Better for now and wait for conditions to improve. This is a similar situation that happened with Rocket Companies (NYSE: RKT), a leading company in the industry.

Rocket share price initially jumped to $38 in 2021 and then plunged to $6 last year. Now, the shares have bounced back to $10.