The home-flipping firm is up practically 2,000% in just some months. Can it hold gaining?
In just some months, Opendoor Applied sciences (OPEN -15.15%) has gone from a damaged firm on the verge of being delisted from the Nasdaq to one of many hottest inventory tales of the 12 months.
In July, retail traders started piling into the net home-flipping inventory after an argument posited by hedge fund supervisor Eric Jackson started to realize traction on-line. Jackson argued that Opendoor might flip into the following Carvana, referring to the 100x achieve the net used automotive supplier made after avoiding chapter in late 2022.
A meme inventory was born as each day buying and selling quantity skyrocketed, at one level exceeding the variety of shares excellent, and Opendoor soared as nicely. That momentum instantly led to a change within the enterprise.
First, CEO Carrie Wheeler stepped down, and earlier this month, the corporate introduced in a brand new administration staff, tapping Shopify chief working officer Kaz Nejatian to function its new CEO, and bringing again founders Eric Wu and Keith Rabois to serve on the board of administrators, with Rabois as chair.
Opendoor shares are already up practically 20 instances from their backside, which means they’re greater than midway to Jackson’s goal, at the very least by one measurement. May the new inventory hold climbing? Let us take a look at three key drivers that might transfer the inventory even greater earlier than its subsequent earnings report, anticipated on Nov. 6.
Picture supply: Getty Pictures.
1. Mortgage charges might come down
Maybe the most important element within the bull case for Opendoor is its relationship to the housing market. The corporate’s fortunes are intently tied to the provision and demand for houses, and the path of housing costs.
The inventory initially surged out of the gate after it went public in 2020 when the housing market was on fireplace throughout the pandemic. Nevertheless, that market crashed in 2022 as rates of interest rose and gross sales of current houses tumbled. Opendoor makes cash from promoting houses for greater than it purchases them for, and by accumulating charges for providers, so it advantages from upward strain within the housing market.
Falling mortgage charges might make each of these issues occur. In reality, charges have already come all the way down to one-year lows, and the Federal Reserve expects to chop its benchmark rates of interest two extra instances this 12 months. Anticipation of decrease charges or indicators of housing market restoration might additionally push Opendoor inventory greater.
2. Administration might make actual modifications
Nejatian intends to hit the bottom working. He has been lively on the social media platform X, and the corporate has already expanded the Opendoor platform to all 50 states, up from simply round 50 markets beforehand. The corporate additionally introduced in a brand new chief monetary officer, naming Christy Schwartz because the interim alternative, efficient Sept. 30, succeeding Selim Freiha.
Rabois, the brand new board chairman, stated in an interview on CNBC that the corporate has turn into too bloated and that it might reduce its workforce from 1,400 all the best way all the way down to 200. Traders ought to count on some extra bulletins from the administration staff within the coming weeks. The fitting one might ship the inventory hovering once more.
3. It is a meme inventory traders have not left
There’s nonetheless loads of power behind Opendoor from the meme-stock crowd, which is typically known as the “$OPEN Military.”
The inventory remains to be buying and selling at enormous each day volumes, averaging 325 million over the past three months, a lot greater than earlier than gaining curiosity from the meme inventory traders. Opendoor additionally continues to appear like a battleground inventory with 26% of the float offered quick, and that has the potential to drive a brief squeeze as nicely.
Meme inventory actions are notoriously unpredictable, however the legions of Opendoor bulls who’ve piled into the shares in the previous couple of months are clearly an asset for the corporate and the inventory.
Opendoor remains to be excessive threat
The explanations above are all potential drivers for the inventory over the following few weeks, however Opendoor stays a high-risk funding. The meteoric features have come totally on bettering expectations, which can or will not be justified, slightly than any significant enchancment in fundamentals. In reality, when the corporate gave third-quarter steerage in August, it referred to as for a big decline in income, exhibiting that it is scaling the enterprise again because the housing market stays weak.
Observers will see if Nejatian and Rabois can work up an actual turnaround plan within the coming weeks, however there may be room for the inventory to maneuver greater, particularly if administration can present indicators of progress.
