It's worth noting that Dating back to its early history, Opendoor nologies (OPEN 90. 00%), the leading online flipper, is one of the worst-performing stocks in the market.
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. The evidence shows stock is down 96% from its peak in 2021, in this volatile climate.
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).
Remarkably, the stock is up 160%, even though there have been no noteworthy changes in the company's fundamental. Additionally, An argument that the stock could be the next Carvana (CVNA -0.
97%) -- which achieved a remarkable turnaround after recovering from near-bankruptcy in 2022 -- seems to have fueled the recent surge. Furthermore, Image source: Getty Images. The next Carvana.
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.
However, At the same time, There's much more friction in selling a than a car, not to mention the 6% commission that's typically part of a sale.
What's more, Carvana had a long track record of sales growth, with 23 straight quarters of triple-digit revenue growth prior to the stock's collapse, driven by similar forces to Opendoor's, including rising interest rates and volatility in used car prices related to the pandemic and the 2022 supply chain crunch.
Additionally, The company also made a poorly timed acquisition of the ADESA car auction.
However, Carvana was able to lower its costs and der steady gross fit in used car sales, and the stock benefited from a new bull market in 2023 and 2024.
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.
Mortgage rates fell to below 3%, and demand was spurred by the need to adapt to new circumstances, which included needing more space to work and play from, as well as an exodus from cities to warmer climates with outdoor space and room for social distancing.
In contrast, As of its first quarter, the company generated $99 million in gross fit on $1.
However, 2 billion in revenue, while contribution fit, which includes other direct costs related to selling a, was $54 million, considering recent developments.
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.