Opendoor Technologies (OPEN 5.14%) stock has delivered astonishing gains this year as the meme stock of 2025. It's up 430% year-to-date, despite dismal earnings, and investors are excited about its new CEO.
It's still cheap, trading at 1.3 times trailing-12-month sales. But a stock is only a bargain if it has significant long-term upside. Otherwise, it's a value trap. Is this an amazing opportunity as Opendoor makes a comeback, or should investors steer clear?
Can Opendoor really change real estate?
A number of real estate technology stocks have tried to add a digital element to what is ultimately a very real-world transaction. Maybe the day will come when you can order a home online and have it shipped to you, but most real estate is staying put.
Companies like Zillow and Redfin are online marketplaces, and some have tried a digitally driven version of iBuying that uses data to identify well-priced homes in areas where they could be easily fixed up and flipped. This is Opendoor's model, which rounds out the process with partnerships with marketplaces like Zillow and with live agents, whom Opendoor finds clients for in exchange for a cut of the proceeds.
Image source: Getty Images.
The business has its merits, connecting buyers and sellers and taking a cut in what should ultimately be a low-cost model. In the ideal environment, there are enough homes for sale for Opendoor to have a large inventory and enough buyers to create a growing revenue stream that will eventually pay for home purchases and still have enough left over for profits.
But the past few years have been crushing for the real estate industry and disastrous for Opendoor. Revenue continues to slide, and although it had been making some progress in cost-cutting, net loss widened in the third quarter.
OPEN Revenue (Quarterly) data by YCharts
Why is the market going wild about Opendoor?
The initial excitement about Opendoor earlier this year was based on social media hype and the banding together of retail investors who might have been trying to generate a short squeeze. The initiative was successful enough to oust Opendoor's CEO, and the company hired Kaz Nejatian in September.
Nejatian is taking the bull by the horns, announcing a slew of initiatives to whip Opendoor into shape. He's intent on accelerating technology and has already implemented more than a dozen new features using artificial intelligence (AI) to improve the model. "Our business will succeed by building technology that makes selling, buying, and owning a home easier and more joyful," he said, "not from charging high spreads and hoping the macro saves us."
I have to admit, the pitch sounds good. Nejatian noted that the company had become fearful of buying because of high prices, and its model of focusing on spread was leading to adverse selection, since cheaper homes aren't good ones. Opendoor has barely been building inventory because of this.
NASDAQ: OPEN
Key Data Points
The new model, what he calls Opendoor 2.0, involves buying many more homes faster, and good ones. The spread might be thinner, but better inventory will get better-quality candidates who will move faster. At the same time, it's going to cut costs by using more AI throughout the business, such as to curate marketing and ad spend.
In terms of buying and shipping a home, Nejatian is working on a "buy now" button so a customer can enter a home virtually, tour it, and buy it with the press of a button -- and without the need for human interaction. Plus, buyers will be able to bundle all the ancillary parts of the process in one interaction. "You'll choose your home, your financing, your warranty, your insurance, all in one place, all in one flow," he envisions.
This can-do attitude is earning Nejatian investor confidence, and Opendoor stock has been soaring since the third-quarter update despite the disappointing results.
Opendoor 2.0
Opendoor's digitally enhanced model has always had something to offer in improving the real estate industry, and it's easy to see why this new strategy sounds even more compelling to investors.
That said, there's no way to know if it can really turn the business around, especially as the external headwinds remain strong.
You'd have to be super risk-tolerant to invest in Opendoor stock today on the chance this will all work out. If you have money to invest that you can afford to lose, you might want to take the risk, but most investors should wait for signs of progress before investing in Opendoor.
