When a stock surges by more than 300% in a single year, it's usually because the underlying company is producing impressive revenue and earnings growth, or because it has secured a game-changing new deal with an important customer. But occasionally, the reason is far more speculative.
Opendoor Technologies (OPEN 6.36%) stock opened this year at $1.59, and by June, it had plunged to $0.51. However, it has since rocketed to $6.70 -- not because its business has materially improved, but because retail traders whipped up a frenzy in the stock using social media platforms like Reddit and X (formerly Twitter).
Is there room for further upside in 2026, or will this incredible run end in tears for investors?
Image source: Getty Images.
Opendoor's business faces significant risks
For most people, their home is their largest financial asset, so they want the best price when it's time to sell. A good real estate agent can make a world of difference, but they can still take weeks or even months to find the right buyer, which creates a lot of uncertainty.
That's why many sellers have turned to Opendoor. After entering some basic details on the company's website, homeowners are presented with a cash offer they can accept or reject. If they proceed with the deal, Opendoor will buy their house with a rapid settlement period of as little as two weeks.
Opendoor aims to make money by quickly flipping the house for a profit. This strategy works great when real estate prices are rising, but it can result in steep losses when the housing market turns lower. Companies like Zillow and Redfin abandoned this business model after the 2021 housing boom ran out of steam -- in Zillow's case, it was losing so much money on its property inventory that the entire company was at risk of collapse.
U.S. existing home sales are currently hovering near a five-year low as rising economic uncertainty and a weak jobs market are keeping buyers sidelined. According to Redfin, there were actually 528,769 more home sellers than buyers in October, which was a record high.
Data by YCharts.
This is a terrible environment for Opendoor's direct buying business, which is why the company is now trying to diversify. It appointed a new CEO in September, Kaz Nejatian, who previously held leadership roles at Shopify and Meta Platforms (Facebook).
He plans to use his experience with artificial intelligence (AI) to help Opendoor buy and sell homes quicker, which will protect the company from large swings in the real estate market. Longer-term, he also wants to create a marketplace where buyers and sellers can transact with each other directly, which will unlock a new revenue stream and reduce Opendoor's reliance on direct buying.
The losses are stacking up
Opendoor's revenue plunged by 33% year over year to $915 million during the third quarter of 2025, after the company sold just 2,568 homes. Its inventory was down by half to just 3,139 properties, which reflects management's cautious approach to this difficult housing market.
Opendoor lost $90 million at the bottom line on a generally accepted accounting principles (GAAP) basis during the third quarter, which took its 2025 year-to-date loss to $204 million. The company lost even more money through the first three quarters of last year, but it was flipping significantly more houses over that period. The key problem is that, on average, Opendoor is losing money on every home it sells.
In fact, Opendoor's gross profit margin (profit before operating expenses) is actually down so far this year compared to 2024. On the bright side, this means the company typically gets closer to profitability when it scales its operations by flipping more properties, which is the strategy Nejatian wants to adopt.
However, one misstep -- like holding too many homes during a market downturn -- could lead to substantial losses.
NASDAQ: OPEN
Key Data Points
Will Opendoor stock move higher in 2026?
The U.S. Federal Reserve has cut interest rates six times since September 2024, which should drive increased activity in the housing market, but it will take time for those positive effects to work their way through the economy.
With that said, Opendoor lost money throughout the last housing boom in 2021, even with the federal funds rate (overnight interest rate) at a historic low of around 0.1%. Therefore, the evidence suggests it might struggle to achieve sustained profitability in the direct buying business even with favorable conditions in the real estate market. This isn't a total surprise considering two of the company's biggest competitors left this industry because they couldn't make the numbers work, as I mentioned earlier.
Retail investors have used social media to trigger buying frenzies in other stocks in the past without any consideration for their fundamentals. GameStop and AMC are two examples, and both stocks crashed once the speculation fever wore off, leaving many investors with painful losses. Given the state of Opendoor's business, I think a similar scenario will play out this time, so investors might want to avoid its stock in 2026.
