Up 160% in the Last Month, Could Opendoor Be the Next Carvana?

S have collapsed, as a that worked during the real estate boom of the pandemic has gone bust amid soaring interest rates and a weak housing market

Additionally, Owners who bought or refinanced at rock-bottom rates during the pandemic are reluctant to sell

Despite that history, the real estate stock caught fire in recent weeks, seemingly as part of a meme stock boom, as chatter around the stock has increased on Reddit's WallStreetBets Page and X (an important development)

Furthermore, Image source: Getty Images

In a post on WallStreetBets in May, one user laid out the case for why Opendoor could be the next Carvana, considering recent developments

What the data shows is y noted that Opendoor had similarly plunged, even though its balance sheet remained stable

Additionally, The post noted that a change in strategy (pairing customers with agents instead of getting a quote directly), the potential tailwind from lower interest rates, its reductions in loss per transaction, and the impact of layoffs and other cost cuts could all lead to the company's recovery

Plus, factors a high short interest could drive a short squeeze

Overall, as the bull thesis goes, the stock has plenty of liquidity on the balance sheet to help it stay afloat and should be able to capitalize on lower interest rates

Furthermore, However, while you can craft a turnaround narrative around almost any beaten-down stock, the comparison to Carvana is flawed (remarkable data), considering recent developments

First, Opendoor has plunged not because of a bankruptcy threat, but because its model seems fundamentally flawed to Wall Street (this bears monitoring)

Moreover, No one has successfully done -flipping at scale before, and other competitors, such as Zillow and Redfin, bowed out of the iBuying competition because they were burning cash and didn't see a future in it, in today's market environment

Additionally, Flipping a is much different from selling used cars

Used cars have standard makes and models, in this volatile climate

Repairs, if needed, are typically straightforward, and cars can be transported to a central facility for repairs, as Carvana does

There's also a well-established model for selling used cars, with thousands of used car lots across the country (which is quite significant), in today's financial world

On the other hand, flipping a is unique (noteworthy indeed)

You need to understand local housing, local zoning laws, and have connections to local contractors who can do any repairs the might need

Additionally, The company also made a poorly timed acquisition of the ADESA car auction

Where Opendoor stands today The factors that could drive a similar recovery for Opendoor still seem distant if not impossible

The evidence shows pandemic-era housing market was unique in the real estate industry and is unly to be repeated

On the other hand, The company reported an adjusted net loss of $63 million, compared to a net loss of $80 million in the same year-ago quarter (an important development)

It reported an adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) loss of $30 million, although it expects to der an adjusted EBITDA fit of $10 million to $20 million in the second quarter

Additionally, Overall, Opendoor's appears to have stabilized, but it continues to lose money

Without a significant change in the housing market, it's hard to see the company mounting a significant turnaround (which is quite significant)

Tariffs are expected to raise prices and make interest cuts more difficult, putting more pressure on the company, in today's market environment

While the meme stock rally can drive Opendoor s, the long-term outlook for the remains troubling

Additionally, Furthermore, Jeremy Bowman has positions in Carvana and Redfin

The Motley Fool has positions in and recommends Zillow Group, in light of current trends

Moreover, The evidence shows Motley Fool recommends Redfin (an important development), considering recent developments

In contrast, The Motley Fool has a disclosure policy.