Opendoor(NASDAQ: OPEN), the largest instant buyer of homes in the U.S., went public by merging with a special purpose acquisition company (SPAC) on Dec. 21, 2020. The combined company's stock opened at $31.47 per share on that first day, and it eventually hit an all-time high of $39.24 on Feb. 11, 2021. At its peak, Opendoor's market capitalization reached $20.6 billion -- or 7.6 times its trailing-12-month sales.
At the time, low interest rates, a hot housing market, and Opendoor's ability to streamline the buying and selling process with its "iBuying" model impressed the bulls. Stimulus checks, social media buzz, commision-free trading platforms, and a fear of missing out drove even more retail investors toward speculative growth stocks. Opendoor's debut was also engineered by the "SPAC king" -- Chamath Palihapitiya -- who attracted plenty of followers during the meme stock buying frenzy in 2021.
Image source: Getty Images.
But today, Opendoor stock trades below $1 per share with a market cap of $717 million as of this writing. Shares plummeted as rising interest rates chilled the housing market and cast a harsh light on its persistent losses. Opendoor also missed its own ambitious growth targets: It generated only $6.9 billion in revenue in 2023, compared with its pre-merger forecast of $9.8 billion.
It's easy for the bears to dismiss Opendoor as just another SPAC-backed start-up that overpromised and underdelivered. But at these prices, it trades at a firesale valuation of just 0.1 times estimated 2025 sales. Assuming Opendoor can stabilize its shaky and cyclical business, its stock could rise tenfold in the coming years.
Why did Opendoor stock collapse?
Opendoor's iBuying platform uses artificial intelligence algorithms to make instant cash offers for homes. It fixes up the properties it acquires and relists them for sale. That business model flourishes when interest rates are low and the housing market is hot.
In 2021, revenue skyrocketed as its adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) turned positive. Pent-up demand for new houses during the pandemic fueled this growth, and the company continued growing in the first three quarters of 2022. However, rising rates became a headwind by the fourth quarter. That slowdown intensified in 2023, and the high costs of purchasing and renovating homes crushed its profitability.
Metric
2021
2022
2023
2024
Revenue
$8.0 billion
$15.6 billion
$6.9 billion
$5.2 billion
Revenue growth
211%
94%
(55%)
(26%)
Homes bought
36,908
34,962
11,246
14,684
Adjusted EBITDA margin
0.7%
(1.1%)
(9.0%)
(2.8%)
Net loss
($662 million)
($1.4 billion)
($275 million)
($392 million)
Data source: Opendoor.
Opendoor's revenue declined again in 2024, but it increased its home purchases as interest rates declined. Its aggressive cost-cutting measures, which included several rounds of layoffs, also stabilized its adjusted EBITDA margin.
The contrarian case for Opendoor
Opendoor might seem like a terrible stock to buy as the Trump administration's "Liberation Day" tariffs take effect. However, this controversial policy could also force the Federal Reserve to accelerate its interest rate cuts this year. If that happens and the tit-for-tat tariffs don't spark a new global recession, the U.S. housing market could heat up again.
Fellow real estate stocks Zillow and Redfin shut down their own iBuying platforms in 2022. That leaves Opendoor as the biggest iBuyer in the U.S. by a wide margin. It generated nearly six times as much revenue as its closest competitor, Offerpad, in 2024.
Therefore, Opendoor remains the best way to invest in the nascent iBuying market, even if its near-term outlook seems murky. That might be why its insiders bought more than three times as many shares as they sold over the past three months.
For 2025, analysts expect Opendoor's revenue to rise 2% as it narrows its net loss. That forecast indicates that its business appears to be stabilizing, so it could be a great time to buy its stock before it attracts more attention from value-seeking investors.
It's a high-risk, high-reward stock
Opendoor is still a risky investment, but I believe it could soar tenfold to around $10 per share share and still be considered a value stock trading at one time this year's sales. The market is too bearish on the business, and it could generate big gains for patient investors who can tune out the near-term noise around tariffs, a trade war, and other headwinds.
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Leo Sun has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Zillow Group. The Motley Fool recommends Redfin and recommends the following options: short May 2025 $10 calls on Redfin. The Motley Fool has a disclosure policy.
