This year began with nothing but hope for shareholders of Realty Income (O 2.53%), Tesla (TSLA -0.40%) and Opendoor Technologies (OPEN 3.32%). Reality hasn't been as kind. All three stocks are trading lower in 2024.
The bullish arguments haven't been entirely silenced; they have been deferred instead of denied. Let's take a closer look at how these three high-profile laggards can turn their downticks into upticks in 2025.
1. Realty Income: Down 4%
When it comes to REITs, there aren't as many "sure things" as Realty Income. It's just one of just three real estate investment trusts to have boosted its payouts for at least 25 years. Earlier this year, it stretched that streak to 29. It also routinely bumps its monthly -- yes, monthly -- distributions higher. It has come through with 124 hikes since 1994.
A lot has happened over the past three decades. Realty Income has bucked the cyclicality. The recession-resistant nature of its portfolio helps. It owns 15,450 commercial properties worldwide that it leases to more than 1,500 different clients. It's diversified, with skin in the game of 89 different industries, but it's largest categories are noteworthy. Supermarkets, convenience stores, and dollar stores are its three largest concentrations at 10.1%, 9.5%, and 6.5% of its portfolio, respectively. These are businesses that stay steady even when the economy isn't at its best. Realty Income shines, even if the stock chart appears a bit dim right now.
Image source: Getty Images.
Realty Income averages four hikes a year, so it's probably not done with the payout bumps this year. The shares trading 4% lower in 2024 and down 11% over the past 12 months have only pushed the yield higher. Realty Income currently yields 5.6%.
It's hard to fathom Realty Income trading lower this year if the Fed was already cutting rates as most economists figured would be the case in late 2023. Rate cuts will help Realty Income as it finances new investments. It will also make the REIT that much more attractive when the leading money market funds are also yielding north of 5%. Whether rates start moving lower in the second half of this year or into 2025, better days should be ahead for Realty Income investors.
2. Tesla: Down 30%
Shares of Tesla more than doubled last year, doing so despite the automaker slashing prices to the detriment of its margins and bottom line. Gravity finally caught up to Tesla. Revenue has decelerated sharply for three consecutive quarters, including an outright 9% top-line decline in its latest report.
Analyst models that had Tesla raising prices over time for both its vehicles and its full self-driving (FSD) platform have met a reality check. Even the game-changing FSD isn't immune. Since September of last year, the up-front price has gone from $15,000 to $12,000, then slashed to $8,000 last month when its monthly subscription was halved.
Expectations have been reset, and analysts have been paring back profit targets for this year and next. Lower expectations aren't a bad thing. For starters, the bar of success is now lower. Short interest is also at a nearly three-year high. The bearish narrative is loud, but the first whiff of good news can send the naysayers scrambling in a short squeeze.
3. Opendoor Technologies: Down 46%
It's perhaps not surprising that the biggest gainer of the three last year is now the biggest casualty. Opendoor nearly quadrupled in 2023. It has been cut almost in half this year. The iBuying market was supposed to bounce back last year, explaining why the home flipper saw its stock soar even as rising mortgage rates froze existing homeowners from giving up their properties to an iBuying specialist like Opendoor.
You don't need to be a rocket scientist to figure this one out. Real estate reselling activity remains icy. Folks locked into mortgage rates at much lower than prevailing financing costs don't want to move and get less bang for their buck. Trailing revenue is less than a third of what it was when Opendoor's business peaked in 2022.
Next year could be special for Opendoor. The moment home loans get substantially cheaper, there is going to be a lot of pent-up demand for folks to trade up or downsize. Opendoor offering those anxious sellers an instant offer on homes that the company can spruce up and resell is a win-win deal.
