Opendoor Technologies (OPEN 7.02%) is a money-losing start-up. That's the first thing that investors need to understand before buying the stock, but it isn't the only thing.
While risk-averse investors should likely watch Opendoor from the sidelines, here are two more things an aggressive investor needs to know before jumping in.
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1. Opendoor's core business may not be scalable
Opendoor is, at its core, a house flipper. It offers home sellers a quick and easy sale. Once Opendoor owns the home, it fixes it up and then turns around and sells it, hopefully for a higher price than what it paid. There's nothing wrong with doing this; small investors have been flipping homes for years.
The big difference is that Opendoor is trying to flip thousands of homes. Given the company's history of losing money, it is far from clear that home flipping is possible at an institutional level. In other words, the company's core purpose may simply not be workable.
When a small investor flips a home, they usually know the local housing market well and fix the home up themselves. And, notably, each home is unique. Opendoor could simply be trying to bite off more than it can chew.
2. Opendoor used the magic buzzword
In 2025, Opendoor brought in a new CEO, Kaz Nejatian. Some of the first words out of Nejatian's mouth were "artificial intelligence." That's the hot market story right now, but just saying AI doesn't make Opendoor an attractive artificial intelligence stock.
NASDAQ: OPEN
Key Data Points
However, the risk is that the AI transition taking place means staff reductions. It isn't clear that AI will be any better at house flipping than the company's human employees were. If AI falls short of expectations, Opendoor would have a hard time rebuilding the human knowledge it lost when it reduced its staff in favor of AI. That could lead to a binary outcome in Nejatian's turnaround effort.
Best to wait for some proof
To Nejatian's credit, he laid out some performance targets for investors to monitor. Most investors should probably wait for the company to hit some of those milestones before taking on the risk that this turnaround doesn't work out as planned. It could take a year or more to get a good read on the success of the new CEO's business approach. However, if the red ink keeps flowing, Opendoor could find it difficult to remain a going concern.
