Over the last three months, Opendoor Technologies' (OPEN 1.32%) stock price has risen by more than 1,570%! This is not a stock that conservative investors should be buying right now, but what about aggressive investors? Tread carefully.
Opendoor is a money-losing start-up
Opendoor is, effectively, attempting to create a company around house flipping. This, historically, has been something that small, local operators have done. Scaling up home flipping hasn't worked out that well so far, noting that Opendoor has yet to turn a full-year profit.
Image source: Getty Images.
Opendoor's goal has always been to use technology to drive the buying and selling process; it just hasn't figured out how to make money doing it. This is part of the reason why the board of directors chose to part ways with the CEO, after agitation from an activist investor, in mid-August.
That was around the time that the shares started to trend higher. And when a new CEO was announced, the shares skyrocketed. Notably, the new CEO touted artificial intelligence, an on-trend technology, as the future of the business. At this point, Opendoor's stock has gotten caught up in the meme stock frenzy that was so common a few years ago.
Just a few months ago, Opendoor was a penny stock considering a reverse stock split. The business itself hasn't changed much since that point. The new CEO could turn Opendoor into a sustainably profitable business, but there is a lot of execution risk here to consider. And yet investors are pricing in so much good news at this point that any stumble could lead to a material stock retreat. Most investors should probably avoid Opendoor for now.
