Opendoor Technologies (OPEN 8.35%) has been going through some major changes recently as a retail investor-led campaign led to the ousting of its CEO. Despite severe external pressure and no reason to believe that's going to change anytime soon, the stock is up 237% over the past year.
The new CEO has a detailed strategy to revamp current operations, transform the company's approach to business, and boost sales and earnings. Could Opendoor end up being a top stock next year?
Image source: Getty Images.
What's been going wrong
Opendoor has been one of several real estate upstarts that have tried to digitally disrupt the traditional way to buy and sell a home. Its main business is iBuying, or flipping homes at scale, using digital processes to make it easier. However, it has several related services, including an online marketplace, digital home tours, and partnerships with real estate agents on the ground.
The main problem for Opendoor is that the housing industry has been under strong pressure as mortgage rates remain high. Homeowners aren't looking to move if it means taking on a new, expensive mortgage, so they're staying put, limiting the number of homes for sale. Even as the Federal Reserve has started to cut interest rates, mortgage rates have stayed stubbornly high, leading to real estate gridlock.
As Opendoor sells fewer homes, it's struggling to grow sales and generate profits. In the third quarter, sales declined 34% year over year, and it produced a $90 million net loss.
The new Opendoor
Opendoor became a meme stock as retail investors rallied to push it higher through a social media campaign. The company onboarded Kaz Nejatian as the new CEO in September, and he's angling to recreate the company as an artificial intelligence (AI)-driven, agile software company.
His explanation as to why Opendoor is stalling is internally driven. He says that the company has been focused on spread, which is limiting it from buying enough homes and keeping its wheels turning. Focusing on spread, by which he means finding cheap homes that can be resold at a higher price, is leading to adverse selection, since it's worse homes that are selling cheaply. He wants to find great homes and resell at a lower spread, benefiting from volume instead. On the third-quarter conference call, when he'd been CEO for just a few weeks, he said that in the past seven days, the company had purchased 230 homes, up from 120 the week he took on the job.
He wants to integrate more technology and AI into the company's systems to do the boring work and cut costs, and he believes that using better software will help Opendoor with the selection process and attracting great customers. He also said there were too many consultants telling executives how to do their jobs, and he believes that management taking back responsibility will help the company become aggressive in getting things right.
Finally, Nejatian wants to offer everything a customer needs to buy a home in one place on its app, including all closing and mortgage services.
NASDAQ: OPEN
Key Data Points
Can this translate into investor gains?
Nejatian has committed to reaching adjusted net income breakeven by the end of his first year on the job. The way that can happen is by stepping up purchases of good homes and selling them more quickly, using more technology to cut costs, and scaling transactions so they cover more fixed costs.
It sounds simple, the way he paints the picture, and sometimes that's really all it takes. If he can pull this off, Opendoor will graduate from meme stock gains to offering real, sustainable value for investors.
At the current price, Opendoor stock trades at 1.1 times trailing-12-month sales. That's not objectively expensive, but for a company losing money as fast as Opendoor, you wouldn't expect it to be higher. At this kind of valuation, I would normally say there's room for expansion. But that would only be true if all of Nejatian's plans work out beautifully.
So yes, there is a possibility that Opendoor stock could be a top stock in 2026. However, that comes with a huge amount of risk as the real estate industry remains pressured, and anyone who wants to take it should only invest money they can afford to lose.
