After a 42% Rally, Is Opendoor the Next Carvana and a Buy?

Opendoor Technologies Inc. OPEN shares have strengthened as retail investors piled on to the meme stock, hoping for a recovery similar to Carvana Co. CVNA 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 ResearchFor now, Opendoor has a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.Zacks' Research Chief Names "Stock Most Likely to Double"Our team of experts has just released the 5 stocks with the greatest probability of gaining +100% or more in the coming months. Of those 5, Director of Research Sheraz Mian highlights the one stock set to climb highest.This top pick is a little-known satellite-based communications firm. Space is projected to become a trillion dollar industry, and this company's customer base is growing fast. Analysts have forecasted a major revenue breakout in 2025. Of course, all our elite picks aren't winners but this one could far surpass earlier Zacks' Stocks Set to Double like Hims & Hers Health, which shot up +209%.Free: See Our Top Stock And 4 Runners UpWant the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Opendoor Technologies Inc. (OPEN): Free Stock Analysis Report Carvana Co. (CVNA): Free Stock Analysis ReportThis article originally published on Zacks Investment Research (zacks.com).Zacks Investment ResearchWeiter zum vollständigen Artikel bei Zacks Weiter zum vollständigen Artikel bei Zacks