This year’s red-hot housing market has challenged Opendoor Technologies (NASDAQ:OPEN). But, regardless of this year’s challenges, opportunity is knocking today for those interested in OPEN stock.
Let’s take a quick look at what has happened to Opendoor lately, then make a risk-adjusted determination aligned with those findings.
The Broader Context Around Interest in OPEN Stock
If you’ve been wanting to buy a place to call home in 2021, you’re likely frustrated. Cash offers, forgoing house inspections, dropping all contingencies … not setting foot on the property, all while paying well above already record-breaking offer prices. That’s the “new normal’ for prospective homeowners.
When it comes to all of that irritation, you’re not alone. Misery loves company and Opendoor Technologies is proof of this. OPEN, which uses its algo-driven platform to purchase and re-sell homes, has had to grudgingly adapt to the times.
In 2021, the real estate market is booming. That means sellers who traditionally need quick proceeds to put toward a new home haven’t sought out the platform’s modestly discounted and generally agreeable offer price.
But don’t be too quick to feel sorry for this “next-gen Property Brothers.” Social Capital Hedosophia, the well-funded special-purpose acquisition company involved with OPEN, has worked its way around getting outbid by diversifying and expanding its operations into 18 additional real estate markets over the past year.
The growth strategy has nearly doubled OPEN stock’s pool of opportunity. So much so, that during this year’s second quarter, Opendoor purchased a record 8,500 properties, which according to the Motely Fool, is “more than the previous four quarters combined.”
What’s more, even in today’s heated real estate game, OPEN’s growing operations yielded an adjusted profit and contribution margin increase of over 500%.
And when today’s new normal eventually reveals its own makeover, Opendoor should be even better-positioned for long-term success.
Just Look At Opendoor’s Monthly Price Chart
Source: Charts by TradingView
Much like today’s hot real estate market where compromise is a certain prerequisite to ownership, the monthly price chart for OPEN stock also requires looking past a flaw or two in order to justify optimism.
Unlike buying a home right now, all things considered, Opendoor’s shares are on sale. And a purchase looks more justifiable.
As I warned earlier, OPEN isn’t the perfect investment to buy if you look at the price chart. For some technical-oriented traders OPEN’s summer doldrums are problematic, as shares spent time on either side of the 76% Fibonacci level.
Price retracements deeper than 62% have a popular mythology — they’re a warning that would-be bullish investors should hold off in anticipation of a full-blown decline of 100%.
Respectfully, though, stocks like OPEN aren’t bound to strict laws of physical nature. Moreover, today a bullish higher-low pattern is in place after shares confirmed three months of inside price consolidation within May’s engulfing candlestick in September.
Still, potential bargain-hunters have other reasons to be nitpicky. Specifically, OPEN stock’s absent monthly stochastics indicator is another flaw. Where’s the secondary support … right? And to be fair, I’m agreeable. It’s like buying a house without a deck in my opinion.
But does that mean the purchase is off the table? I don’t believe so. As a compromise (and if it’s priced right), a deck can always be built in due time. Likewise, OPEN’s stochastics will eventually be there to aid in future decisions.
Today, given Opendoor’s fairly attractive discount, I’m upbeat on the short-term, rent-to-own market using a bull call spread.
One of my favored plays here is a Nov $21/$23 call vertical. This is well-positioned to profit while also making sure buyers don’t extend themselves in a more challenged environment.
On the date of publication, Chris Tyler does not hold (either directly or indirectly) any positions in securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
Chris Tyler is a former floor-based, derivatives market maker on the American and Pacific exchanges. For additional market insights and related musings, follow Chris on Twitter @Options_CAT and StockTwits.