Opendoor Technologies (OPEN -1.77%) has taken the market by storm in the last three months. The online home flipper gained traction as a meme stock back in July after hedge fund manager Eric Jackson made the argument online that the stock, which was trading at just around $0.50/share, could be the next Carvana, referring to the online used car dealer that jumped more than 100 times after nearly going bankrupt in 2022.
Opendoor picked up steam as retail investors piled into the stock, and the surrounding excitement seemed to help trigger a leadership overhaul. In August, CEO Carrie Wheeler stepped down, and earlier this month, the company brought Shopify COO Kaz Nejatian as its new CEO. Co-founders Eric Wu and Keith Rabois have joined the board again, with Rabois serving as chairman.
At one point, Opendoor was up more than 2,000%, though it has since pulled back modestly from its peak.
Now, Jackson has another stock he's calling for to be the next 100-bagger: Better Home & Finance (BETR -8.58%).
What is Better Home & Finance?
Better, as the company is often known, is a digitally native homeownership company with a suite of products including mortgage, insurance, and other real estate services that help guide prospective homebuyers through the process of buying a home.
It engages with customers through its artificial intelligence (AI) technology platform, Tinman, which instantly allows customers to see their available mortgage rates and get preapproved in as little as three minutes.
Like Opendoor, Better is also seeking to disrupt the massive housing market through a digital-first approach, and it's delivering solid growth even in a weak housing market.
Funded loan volume rose 25% to $1.2 billion in the second quarter, and overall revenue rose 37% to $44.1 million, showing that the business is still small. It is also unprofitable, losing $36.3 million in the second quarter.
Similar to Upstart, the company makes money by originating mortgages and then selling them to investors. That position also means that the company is likely to benefit from falling interest rates.
Better was founded in 2014 and went public through a special purpose acquisition company (SPAC).
Image source: Getty Images.
Could Better be the next Opendoor?
At this point, the connection between Better and Opendoor seems spurious, though the attention that Jackson has gotten has enabled Better to become another meme stock, as it doubled over a two-day span after he began posting about it on X. Jackson even went as far as to call Better a potential 350-bagger in two years.
The argument for both stocks is tenuous right now. Opendoor has never generated a profit in its history, even when the real estate market was soaring back during the pandemic. The business model is unproven and relies on the company being able to sell homes for more than it purchases them for, as well as collecting fees for services.
With home prices already stretched, lower rates may not fuel the gains in home prices that Opendoor investors are hoping for.
At Better, on the other hand, the company has not yet reached significant scale, as it's expected to report less than $200 million in revenue this year.
What should investors do?
At this point, both stocks seem to be moving for mostly meme-based reasons, and investors should expect volatility ahead.
While Opendoor's management change might seem promising, the fundamentals of the business are still weak. Meme stocks can cut both ways, falling just as they've surged, and piling into a stock that's already been pumped up could be riskier than it's worth.
