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After a 42% Rally, Is Opendoor the Next Carvana and a Buy?
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Key Takeaways
OPEN shares surged 42.7% as retail traders on Reddit fueled interest in the struggling iBuying platform.
The company posted Q1 gross profit of $99M on $1.2B revenues, narrowing its net loss from the prior year.
Opendoor faces high debt and housing market risks, despite a potential shift to agent-assisted transactions.
Opendoor Technologies Inc. (OPEN - Free Report) shares have strengthened as retail investors piled on to the meme stock, hoping for a recovery similar to Carvana Co. (CVNA - Free Report) despite housing market headwinds. Is now a good time to invest in OPEN stock, and can it rebound like Carvana? Let’s explore this.
Why Opendoor’s Shares Jumped?
As an iBuying platform, Opendoor’s business model involves purchasing homes from sellers online, renovating them, and then reselling at higher prices. The online home flipper’s business was successful during the real estate boom, but it struggled post-pandemic as homeowners who bought houses cheaply were hesitant to sell.
Rising interest rates and a sluggish housing market did little to boost Opendoor’s business, and its shares have fallen 96% from their peak in 2021. However, recently, Opendoor’s shares gained momentum as retail investors showed interest through social media platforms.
Opendoor’s shares jumped 42.7% on Monday as interest in the stock increased on Reddit’s WallStreetBets Page and other sites. EMJ Capital founder Eric Jackson is also optimistic about the stock and expects Opendoor to trade at $82 a share soon. Currently, Opendoor is trading below $4 per share.
Reasons to Be Bullish on Opendoor Stock
Opendoor’s first-quarter results have been encouraging, as the company announced a gross profit of $99 million on total revenues of $1.2 billion. Its net loss for the quarter was $63 million, down from a $80 million net loss a year earlier. It posted an adjusted EBITDA loss of $30 million but expects an adjusted EBITDA profit between $10 million and $20 million in the second quarter.
Opendoor’s efforts to adopt a real estate agent-assisted business model could prove to be advantageous, as it offers higher profit margins and greater capital efficiency. If mortgage rates decline and housing demand rises, Opendoor could see further recovery.
Is Opendoor Stock the Next Carvana?
Numerous individuals are drawing parallels between Opendoor’s present recovery and the turnaround achieved by Carvana, which experienced a similar rebound following its bankruptcy in 2022. However, before Carvana stock’s downfall, the company was consistently reporting quarterly revenue growth.
Eventually, Carvana capitalized on the favorable market conditions in 2023 and 2024, reduced expenditures, and increased profits through the sale of pre-owned vehicles.
Can Opendoor repeat the same success? Unlike Carvana, Opendoor is not bankrupt; instead, its business model is questionable. Few companies have managed to successfully scale home-flipping, with many withdrawing from the iBuying market. On the other hand, the used car sales industry is a well-established business. Therefore, comparing Carvana and Opendoor is not accurate.
Here’s How to Trade Opendoor Stock Now
A potential shift in its business model, along with changes in broader housing market trends, may lead to a recovery for Opendoor, prompting stakeholders to hold onto their shares.
However, new entrants should invest at their own risk since Opendoor’s current share price is not supported by its underlying financial performance. Moreover, if tariffs rise, the resulting higher prices would complicate the process of reducing interest rates, thereby exerting pressure on Opendoor’s business.
Additionally, Opendoor has a 242.6% debt-to-equity ratio, much higher than the Internet - Software industry’s average of 16.4%, indicating greater financial risk and more susceptibility to economic downturns.
Image: Bigstock
After a 42% Rally, Is Opendoor the Next Carvana and a Buy?
Key Takeaways
Opendoor Technologies Inc. (OPEN - Free Report) shares have strengthened as retail investors piled on to the meme stock, hoping for a recovery similar to Carvana Co. (CVNA - Free Report) despite housing market headwinds. Is now a good time to invest in OPEN stock, and can it rebound like Carvana? Let’s explore this.
Why Opendoor’s Shares Jumped?
As an iBuying platform, Opendoor’s business model involves purchasing homes from sellers online, renovating them, and then reselling at higher prices. The online home flipper’s business was successful during the real estate boom, but it struggled post-pandemic as homeowners who bought houses cheaply were hesitant to sell.
Rising interest rates and a sluggish housing market did little to boost Opendoor’s business, and its shares have fallen 96% from their peak in 2021. However, recently, Opendoor’s shares gained momentum as retail investors showed interest through social media platforms.
Opendoor’s shares jumped 42.7% on Monday as interest in the stock increased on Reddit’s WallStreetBets Page and other sites. EMJ Capital founder Eric Jackson is also optimistic about the stock and expects Opendoor to trade at $82 a share soon. Currently, Opendoor is trading below $4 per share.
Reasons to Be Bullish on Opendoor Stock
Opendoor’s first-quarter results have been encouraging, as the company announced a gross profit of $99 million on total revenues of $1.2 billion. Its net loss for the quarter was $63 million, down from a $80 million net loss a year earlier. It posted an adjusted EBITDA loss of $30 million but expects an adjusted EBITDA profit between $10 million and $20 million in the second quarter.
Opendoor’s efforts to adopt a real estate agent-assisted business model could prove to be advantageous, as it offers higher profit margins and greater capital efficiency. If mortgage rates decline and housing demand rises, Opendoor could see further recovery.
Is Opendoor Stock the Next Carvana?
Numerous individuals are drawing parallels between Opendoor’s present recovery and the turnaround achieved by Carvana, which experienced a similar rebound following its bankruptcy in 2022. However, before Carvana stock’s downfall, the company was consistently reporting quarterly revenue growth.
Eventually, Carvana capitalized on the favorable market conditions in 2023 and 2024, reduced expenditures, and increased profits through the sale of pre-owned vehicles.
Can Opendoor repeat the same success? Unlike Carvana, Opendoor is not bankrupt; instead, its business model is questionable. Few companies have managed to successfully scale home-flipping, with many withdrawing from the iBuying market. On the other hand, the used car sales industry is a well-established business. Therefore, comparing Carvana and Opendoor is not accurate.
Here’s How to Trade Opendoor Stock Now
A potential shift in its business model, along with changes in broader housing market trends, may lead to a recovery for Opendoor, prompting stakeholders to hold onto their shares.
However, new entrants should invest at their own risk since Opendoor’s current share price is not supported by its underlying financial performance. Moreover, if tariffs rise, the resulting higher prices would complicate the process of reducing interest rates, thereby exerting pressure on Opendoor’s business.
Additionally, Opendoor has a 242.6% debt-to-equity ratio, much higher than the Internet - Software industry’s average of 16.4%, indicating greater financial risk and more susceptibility to economic downturns.
Image Source: Zacks Investment Research
For now, Opendoor has a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.