Opendoor Technologies (NASDAQ:OPEN) had an excellent day on Thursday after reporting its most recent results. As of 3:30pm EST, Opendoor's stock had risen by more than 14% for the day.
After Zillow Group decided to pull the plug on iBuying a few weeks ago, investors were understandably nervous that it could indicate trouble for the entire iBuying industry. Fortunately, Opendoor's third-quarter results show that isn't the case. Opendoor bought 15,181 homes in the third quarter, more than the entire iBuying industry did in the second quarter. And while Zillow reported an adjusted EBITDA (earnings before interest, taxes, depreciation, and amortization) loss of $380 million in its iBuying business for the quarter, Opendoor generated an adjusted EBITDA profit. Plus, Zillow bowing out of the business effectively eliminates Opendoor's closest competitor in the space.
So is Opendoor a buy?
My biggest concern when it comes to Opendoor is that it's setting itself up for an inventory backlog. While it certainly seems to be handling things better than Zillow did, buying nearly 9,200 more homes than it sold in the third quarter is a recipe for a growing backlog.
While there isn't a set-in-stone rule, iBuyers generally aim to buy homes, make repairs, and sell them all within 90 days or so. Opendoor currently has more than 17,000 homes in its inventory, or nearly three times what it sold in the third quarter.
The bottom line is that Opendoor is the clear leader in the iBuying space, and if the company can figure out how to move its inventory in a timely manner, there could be tremendous upside ahead of it. This isn't a low-risk stock by any means, and we'll see if the company was able to move its record haul of homes when we hear its fourth-quarter results in a few months.