Opendoor Technologies (OPEN +3.44%), the leading instant buyer of homes in America, went public on Dec. 21, 2020, by merging with a special purpose acquisition company (SPAC). Its stock opened at $31.47 on its first day, and it eventually closed at a record high of $35.88 on Feb. 11, 2021.
But today, the stock trades at about $2.50 a share. It plummeted more than 90% as rising interest rates and other macro headwinds chilled the housing market. Let's see if this out-of-favor real estate stock might bounce back as interest rates decline.
Image source: Getty Images.
The last major iBuyer standing
As an instant buyer (or iBuyer), Opendoor uses its AI algorithms to make instant cash offers for homes. It fixes up those properties and relists them on its own marketplace. That streamlined business model flourished when interest rates were low and the housing market was hot.
NASDAQ: OPEN
Key Data Points
However, the Fed's rate hikes in 2022 and 2023 ended the post-pandemic housing boom while driving up the costs of buying and renovating those properties. That's why Zillow and Rocket's Redfin both shut down their integrated iBuying platforms in 2022.
But with Zillow and Redfin out of the picture, Opendoor is the one big major iBuyer standing. It's expected to generate more than six times as much revenue as its closest competitor, Offerpad, this year. So if interest rates decline, the housing market warms up, and economies of scale kick in, its growth could accelerate again.
When will Opendoor reach an inflection point?
In 2021, Opendoor's revenue and adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) skyrocketed as the pandemic eased and sales of new homes surged. Unfortunately, rising rates forced it to reduce its home purchases in 2022 and 2023. Its adjusted EBITDA margins turned red again, and it racked up more losses.
|
Metric |
2021 |
2022 |
2023 |
2024 |
|---|---|---|---|---|
|
Revenue |
$8 billion |
$15.6 billion |
$6.9 billion |
$5.2 billion |
|
Revenue growth |
211% |
94% |
(55%) |
(26%) |
|
Homes bought |
36,908 |
34,962 |
11,246 |
14,684 |
|
Adjusted EBITDA margin |
0.7% |
(1.1%) |
(9%) |
(2.8%) |
|
Net loss |
($662 million) |
($1.4 billion) |
($275 million) |
($392 million) |
Data source: Opendoor.
But in 2024, Opendoor bought more homes again as the Fed's three interest rate cuts stabilized the housing market. Its adjusted EBITDA margin also improved as it pruned its workforce, reduced its resale transaction costs and commissions, and streamlined its other spending.
In the first quarter of 2025, its revenue only dipped 2% year over year to $1.2 billion, and its home purchases rose 4% to 3,609 units. Its adjusted EBITDA margin also improved 160 basis points to negative 2.6% as it narrowed its net loss from $109 million to $85 million.
For the second quarter, it expects its revenue to decline less than 1% at the midpoint with a positive adjusted EBITDA margin of about 1%. For the full year, analysts expect its revenue to decline about 5% to $4.9 billion with an adjusted EBITDA margin of negative 0.7%. That stabilization indicates the storm clouds are finally dissipating.
Does Opendoor look undervalued relative to its growth potential?
Four catalysts could turn that stabilization into an acceleration. First, the Fed is expected to reduce its rates at least two more times this year. That could drive more sellers and buyers back to the housing market.
Second, it's partnering with more homebuilders and real estate platforms (including Zillow and Redfin) to reach more sellers.
Third, the company has been upgrading its own AI algorithms to improve the accuracy and speed of its home valuations and repair estimates.
Lastly, it's expanding Opendoor Exclusives, its new marketplace, which directly matches buyers to sellers with its AI pricing engine. That capital-light approach, which doesn't require Opendoor to buy and renovate any houses on its own, would help it generate higher-margin commissions without increasing its debt.
For 2026, analysts expect revenue to rise 18% to $5.8 billion as its adjusted EBITDA margin rises to nearly break-even levels. With an enterprise value of $3.06 billion, it still looks undervalued at a multiple of less than 1 next year's sales.
Opendoor's stock already surged about 370% over the past month. A new meme stock rally, viral comments from a hedge fund manager about it becoming the "next Carvana," and speculation of a reverse stock split brought back the bulls. But if you expect its growth to accelerate again, it isn't too late to buy its volatile stock.
