Don’t Give Up on Opendoor Technologies

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Some folks might only know Opendoor Technologies (NASDAQ:OPEN) as a digital marketplace for real estate. The company does provide that service, but the owners of OPEN stock should know the full extent of Opendoor’s business model.

A picture of the OpenDoor (OPEN stock) app on a phone.

Source: PREMIO STOCK/Shutterstock.com

As InvestorPlace contributor Chris MacDonald observed, Opendoor is a key player in what’s known as the iBuying market. MacDonald explained that Opendoor “uses its proprietary algorithmic technology to buy and sell homes on the open market.”

In other words, Opendoor isn’t only a digital marketplace. The company is also a house flipper, so to speak. But the question is whether it’s a good time to be in the iBuying business.

We’ll definitely delve into the progress  of Opendoor’s iBuying amid a challenging real estate environment. First, however, it’s important to see how Wall Street has been treating Opendoor lately.

A Closer Look at OPEN Stock

Apparently, the sentiment towards Opendoor Technologies on Wall Street is largely negative . Back in February 2021, OPEN stock topped out at $39.24. Since then, it has been sliding.

The worst part of the collapse started in November of last year. Alarmingly, Opendoor’s share price declined from $24 to $8 in a four-month period.

The technical damage from that huge decline is undeniable. On the other hand, contrarian investors should be salivating at the prospect of buying OPEN stock at $7, the area where the shares traded today.

If you’re serious about buying low and selling high, then I invite you to consider taking a position in Opendoor. The shares do carry some risk of course, but they can also soar 200%-300%.

Getting Serious About iBuying

Opendoor Technologies is ambitiously ramping up its home-buying business i.e. its iBuying efforts.

Consider this: in 2021, Opendoor purchased 36,908 homes. That’s a whopping 498% increase over the number of homes that the company bought in 2020.

Furthermore, last quarter the company purchased 9,639 homes, up 378% compared to the same period a year earlier.

Also in Q4, Opendoor expanded its inventory to 17,009 homes, representing $6.1 billion in value and marking a jaw-dropping 1,210% increase over the same quarter a year earlier .

And by the way, the company’s Q4 financial results were amazing. That’s because it generated $3.8 billion of revenue, representing an eye-watering 1,435% YOY increase.

Given the foregoing stats, it certainly appears that Opendoor Technologies is firing on all cylinders in the iBuying market. What could possibly go wrong?

The Big Fear

What could go wrong, apparently, is that the U.S. Federal Reserve might throw a wrench into the works.

MacDonald, the other InvestorPlace contributor, did an outstanding job of summarizing the connection between interest rates and Opendoor’s iBuying business:

“In bull markets, this strategy tends to outperform. Buying more homes as prices surge tends to result in more profits. However, the backdrop of rising interest rates have put investors on the defensive with such stocks.”

Consequently, the owners of OPEN stock should closely monitor the Federal Reserve’s plans to increase interest rates. Higher rates could discourage borrowing and lending activity, thereby putting negative pressure on the iBuying market.

Still, as MacDonald pointed out, “concerns around rising interest rates have abated somewhat.” Just recently, Federal Reserve Chairman Jerome Powell seemed to suggest that the central bank will pursue a gradual path of interest-rate increases.

“We’re going to avoid adding uncertainty to what is already an extraordinarily challenging and uncertain moment,” Powell stated.

The Bottom Line

Overall, Opendoor’s fourth-quarter and full-year 2021 financial results were excellent. That’s bullish for OPEN stock.

What might be bearish for the name is the uncertainty surrounding the future course of interest-rate hikes. Powell, however, appears to prefer gradual interest rate increases.

In the final analysis, OPEN stock is cheap, and Opendoor is aggressively staking its claim in the robust iBuying market. For risk-tolerant investors , buying a moderate number of Opendoor Technologies’ shares could pay off in the long run.

On the date of publication, David Moadel did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.


Article printed from InvestorPlace Media, https://investorplace.com/2022/03/dont-give-up-on-open-stock-as-ibuying-still-has-potential/.

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