Opendoor Technologies (OPEN 6.74%) has certainly been one of the biggest meme stocks of the year. Despite declining revenues, big bottom-line losses, and a rough operating environment, the retail investing community has pushed the stock higher, and as the year draws to a close, it's up by a staggering 347%. Let's consider where it could be in a year.
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New CEO, same story
Opendoor is a digital real estate company that assists home buyers and sellers. It was also making strides in its iBuying business before the Federal Reserve hiked interest rates and the housing market came to a near standstill. Several years later, the Fed has dialed back its benchmark rate a bit, but mortgage rates are still elevated compared to where they were, the housing industry remains under pressure, and Opendoor is still struggling.
One important consequence of the meme stock hype was that Opendoor got a new CEO, Kaz Nejatian, who has some new ideas about how to revamp the company and boost business. He announced three goals for Opendoor: to scale up its home acquisitions, improve its unit economics, and build its operating leverage. In the third-quarter earnings release, he said that management is "refounding the company as a software and [artificial intelligence] AI company," and asserted that it would reach breakeven on adjusted net income on a 12-month basis by the end of 2026.
NASDAQ: OPEN
Key Data Points
It's hard to imagine Opendoor achieving a complete turnaround while the housing market is still experiencing intense pressure, but the real estate market could improve over the next year if interest rates continue to come down, which would help Nejatian reach his goals. As the company accelerates its home buying and uses outside proceeds to make the purchases, it can leverage the quick turnaround it's looking for to generate higher revenue and reach the breakeven it's aiming for by next year. If all goes according to plan, revenue should be increasing at this time next year, potentially at double-digit percentage rates. If it can do that and maintain the same price-to-sales ratio of just over 1 that it currently sports, the stock would bounce proportionally.
