Shares of Opendoor Technologies (OPEN 39.42%) were soaring again today as the meme-stock tailwind that has pushed the online home-flipping stock up in recent weeks seemed to gain strength today, even though there was no company-specific news out on the stock. The notion that Opendoor could be the next Carvana seems to be picking up steam online in social media forums like X and Reddit, and trading volume in the stock has soared.

As of 1:59 p.m. ET, the stock was up 35.1%.

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Opendoor gets the meme treatment

Opendoor has performed remarkably over the short term as the stock has now nearly tripled in just the last few weeks.

Opendoor has historically been volatile, and it had fallen into penny stock range at a price of under $1 so some fluctuations in the share price are understandable, but it now appears that the momentum from a snowballing group of retail investors is pushing the stock higher.

A post on Reddit’s WallStreetBets in May seems to have planted the seed for the recent rally. In a post titled, “Opendoor is the next Carvana,” which now has more than 1,000 comments, one user said he bet $155,000 on Opendoor, and laid out an argument for recovery with a change in its business model, and the short-term impact of hedge funds closing their short bets at the end of the second quarter.

A short squeeze may have also helped fuel the stock’s gains today as 24% of the float was sold short as of mid-June, and the stock is seeing unusually high volume today with more than 219 million shares traded as of 2:30 p.m. ET, higher than in any session in the last year, and well above the 90-day average of 84.8 million.

Where does Opendoor go from here?

Notably, the recent gains have been unrelated to anything going on with the business.

Opendoor gained yesterday even as the June Consumer Price Index (CPI) report made it less likely that the Federal Reserve will cut interest rates. At this point, the stock seems to have become divorced from the fundamentals of the business, which is generally a bad sign for the long term.

While momentum and meme-stock mania could push Opendoor higher, long-term investors are better off sitting this one out.

Next-generation real estate company Opendoor Technologies (OPEN 6.00%) wasn’t exactly looking like the wave of the future in the first summer month of this year.

June saw the company’s stock lose more than 18% of its value, which wasn’t all that surprising given a piece of financial engineering it announced toward the start of the month. An analyst’s recommendation downgrade also dampened investor sentiment.

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Splitsville

On June 6, the company revealed that it had filed the initial regulatory paperwork to prepare for a reverse stock split. It intends to bring the matter to a vote in a special meeting for its investors.

A reverse stock split is a measure in which a company reduces its total number of shares outstanding. In its press release divulging the news, Opendoor quoted CFO Selim Freiha as saying that the move “is intended to support long-term shareholder value and give us optionality in preserving our listing on Nasdaq.”

The company said it aimed to reverse-split its stock at a ratio of one share for every 10, up to 1-for-50.

I should stress here that neither a standard nor a reverse stock split changes the market cap of a stock; only the amount of shares outstanding and the price are modified. The fewer shares, the higher the price in the case of reverses.

Opendoor had intended to hold the special shareholder meeting on Monday, July 28.

The company is vulnerable to downturns in the housing market, as it is essentially a reseller that buys homes, then spruces them up in order to “flip” them on the market and pocket a profit. This is a juicy business model when housing is on an upswing, but it can produce major headaches if the market is stagnant or heading south.

An analyst became more bearish

As June worked its way to a finish, a new analyst report threw a bit of a shadow on Opendoor stock. CItizens JMP’s Andrew Boone re-evaluated his take on the company and elected to downgrade his recommendation on the shares. Now Boone believes Opendoor only rates a market perform (i.e., hold) instead of a market outperform (buy).

According to reports, the basis for Boone’s new view is his belief that Opendoor seems to be functioning more as a backup option for people trying to sell their homes, rather than as their primary means of sale. He also mentioned the company’s high level of debt, which has become expensive to service.

On a brighter note, he said that Key Connections, a new program that connects partner real estate agents with sellers, could help Opendoor improve its fortunes.

To me, Opendoor is a company that has some interesting ideas for how to profit from real estate. It hasn’t yet turned these concepts into a viable business, however, so I would give its stock a pass until more signs of potential success emerge.

Shares of Opendoor Technologies (OPEN 26.28%) were soaring today after the online home flipper posted better-than-expected results in its first-quarter earnings report.

The stock had fallen sharply in recent months, but the latest round of results gave investors some hope that the company can build a viable business over the long term, especially in the face of a weak housing market.

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Opendoor moves closer to breakeven

Opendoor reported a revenue in decline of 2% to $1.15 billion in the quarter, ahead of the consensus at $1.06 billion. However, revenue isn’t a useful metric for a company like Opendoor, as it can earn revenue from simply buying and selling homes, even if it doesn’t earn a profit.

The real test is profitability, and the company did take a step toward breakeven with its adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) loss of $30 million, narrowing from a loss of $50 million.

Management said that buyer demand continued to be weak, and that the rate at which homes go under contract is down 25% and delistings are up 30%, indicating weak demand from homebuyers due to high mortgage rates and concerns about a recession.

Despite those headwinds, investors were pleased with second-quarter guidance that called for an adjusted EBITDA profit of $10 million-$20 million. The company also acquired 3,609 homes in the first quarter, up 4% from a year ago heading to peak buying season.

What’s next for Opendoor

Opendoor’s share price has fallen to less than $1, a sign that investors have largely given up on the stock, and a recovery will be difficult to achieve without a significant improvement in the housing market.

Opendoor has $559 million in cash on the balance sheet, meaning it’s not in danger of failure, but the company can’t lose money forever. Peers like Zillow and Redfin have already given up on the iBuying business model.

At this point, it’s still unclear if it will work for Opendoor.

Shares of the online housing brokerage Opendoor Technologies (OPEN -4.13%) plunged 23% this week, according to data compiled by S&P Global Market Intelligence, after the latest data showed that housing sales slowed to their lowest pace since 2009.

Housing inventory climbed quickly, but sales slowed as potential homebuyers shunned high prices, elevated interest rates, and economic uncertainty. With an unpredictable macroeconomic climate, investors are concerned that more pain could be ahead for the housing market and Opendoor.

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A cooling climate

The housing market showed its first dramatic signs of slowing down in March, with existing-home sales dropping 5.9% during the month compared to February. The monthly drop also represented a 2.4% decline year over year, according to data from Realtor.com.

Mortgage rates have fluctuated over the past month since President Trump announced aggressive tariffs on U.S. trading partners. But despite some temporary dips, they’re still elevated, sitting at around 6.8% for a 30-year mortgage.

While not historically high, mortgage rates are much higher than they were a few years ago, and they’ve remained stubborn during a historic rise in housing prices. For example, the median home sales price has spiked nearly 27% over the past five years to $416,900.

These rapidly accelerating home prices were fine when buyers felt more confident in the economy and their jobs, but that’s changed recently. A recent survey found that consumer confidence in where the economy is headed is at a 12-year low.

All of this is bad news for Opendoor, whose platform connects buyers and sellers. Opendoor also buys, flips, and sells homes, so the slowdown in homebuying is likely to hurt the business. Opendoor’s revenue fell 26% in 2024 to $5.2 billion, and its net loss widened to $392 million. Those figures were reported before the latest housing data, meaning Opendoor could face further downward pressure.

Not a great trajectory

With sales falling in 2024 and losses widening, Opendoor was already struggling. However, the latest housing market data indicates that tougher times could come.

Even if Trump’s tariffs don’t spur a recession, it’s evident that with consumers worried about their jobs and about price increases on goods due to tariffs, they’re holding off on house purchases. And with no end in sight to the tariff uncertainty, Opendoor may continue to be affected by this negative homebuyer sentiment.