Opendoor Stock Is Up 325% in the Last Month. My Prediction for What Comes Next.

S of Opendoor nologies (OPEN -10

Investors are piling into Opendoor, driving up the stock price of this small-cap company with high short interest

In contrast, However, nothing has fundamentally changed this real estate platform's model

Times were tough for the forgotten iBuying giant

Frozen real estate transactions and higher interest rates killed the company's growth potential, along with its risky model

Moreover, Furthermore, An iBuyer is a real estate platform that directly buys s from sellers and relists them to buyers, hoping to earn a fit spread

It's house-flipping at a national scale, funded by debt and venture capitalists trying to disrupt the traditional buying cess

Despite these struggles, online traders have begun loading up on its s, given the current landscape

Since it has a low float and is a small-cap company, the iBuyer's stock soared on this increased activity, which is why it is now up so much so quickly

On the other hand, Image source: Getty Images, in today's market environment

What's the future model (which is quite significant)

However, In its last quarterly letter, management highlighted its evolving model, where it is now working with real estate agents to funnel potential sellers to let Opendoor make an all-cash offer for them

In a frozen housing market where many people are priced out by high prices and increased mortgage rates, the company needs all the demand it can get in order to grow its purchases again, which will drive revenue higher

This's a big evolution of its model, but not one that will solve two fundamental blems the company still has

First, there are the low margins it earns between its purchase price and selling price for its housing inventory

The second issue with its model is liquidity and debt financing

When it purchases s, it does not sell them immediately, leaving them on its balance sheet

Nevertheless, If it increases its pace of purchases, it needs funding to do so

This's why as revenue grew for Opendoor, so did its debt financing, in this volatile climate

Interest expenses are a huge headwind Combined with low gross margins, this is why the company has never turned a fit

My prediction for Opendoor stock It doesn't matter if the stock is out of the gutter because of loud online traders

However, It doesn't matter that the company now enlists real estate agents to funnel potential purchases to the platform

What matters is a lack of fitability and a flawed -flipping model

It has never generated a fit, requires a ton of debt to grow, and is significantly smaller than it was at its peak during the pandemic, in light of current trends

The long-term trend in its price has been rational, not the recent rebound in the stock

My prediction is that Opendoor's price returns to its downward trajectory if the company keeps losing money over the next few years (quite telling)

Furthermore, Avoid buying this stock today

The Author Brett Schafer is a contributing Stock Market Analyst at The Motley Fool covering consumer goods, financials, nology, and industrials

In contrast, Prior to The Motley Fool, Brett worked in the engineering field for science laboratories

In Mechanical Engineering and minors in Finance and Mathematics from Washington State University

Nevertheless, Fun fact: The Wall Street Journal and other national newspapers Brett’s lab work on Major League Baseball’s juiced ball blem, where he was the lead lab nician

TMFBrettSchafer X @CCM_Brett Brett Schafer has no position in any of the stocks mentioned

The Motley Fool has no position in any of the stocks mentioned

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