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We came across a bullish thesis on Opendoor Technologies Inc. (OPEN) on Substack by LongYield. In this article, we will summarize the bulls’ thesis on OPEN. Opendoor Technologies Inc. (OPEN)'s share was trading at $0.872 as of May 7th.
A real estate agent overviewing a portfolio of houses in the city.
Opendoor Technologies Inc. (OPEN), a pioneer in e-commerce for residential real estate, reported its Q1 2025 results amid a tough housing environment defined by high mortgage rates, weak buyer demand, and elevated delistings. Operating in 50 U.S. markets since 2014, Opendoor has retooled its strategy to maintain stability and edge closer to profitability. With mortgage rates nearing 7%, transaction volumes have slowed, forcing the company to adapt. Opendoor responded by increasing spreads to preserve margins, even if it meant acquiring fewer homes. This discipline is underpinned by refined pricing algorithms and targeted marketing, helping the company adjust to seasonal and regional market conditions. At the same time, Opendoor is piloting an agent partnership model in 11 markets, referring sellers to vetted agents who can offer both cash and traditional listings. This initiative is designed to improve conversion rates and drive asset-light commission-based revenue, reducing inventory risk while broadening the company's service offerings.
This strategic evolution marks Opendoor’s shift from a cash-offer platform to a broader selling options platform. Leadership emphasized adaptability on the earnings call, striking a balance between caution and long-term optimism. Financially, Q1 2025 showed signs of resilience: revenue held steady at $1.2 billion, up 6% sequentially, while home acquisitions rose 4% year-over-year to 3,609. Contribution profit landed at $54 million (4.7% margin), down slightly from the prior year, but the adjusted EBITDA loss narrowed to $30 million from $50 million, driven by reduced operating expenses. Fixed costs fell 33% year-over-year, from $58 million to $39 million, reflecting the company’s focus on lean operations. Opendoor’s liquidity remains strong, with $559 million in unrestricted cash and $1 billion in total capital. Its $7.9 billion in nonrecourse asset-backed borrowing capacity—$2.3 billion of which is committed—offers significant financial flexibility, bolstered by recently renewed facilities running through at least 2027.
Looking ahead, Opendoor’s Q2 2025 guidance reflects cautious progress. It expects $1.45–$1.525 billion in revenue and positive adjusted EBITDA of $10–$20 million—its first in three years. Contribution profit is forecast at $65–$75 million with stable margins. However, home acquisitions will fall to ~1,700, reflecting wider spreads and reduced marketing spend, measures intended to protect capital but which may limit top-line growth later in the year. Still, Opendoor’s post-earnings stock surge of 9.37% signals investor confidence in its path to profitability. Analysts offered mixed reviews: some, like Citi, cut price targets due to persistent macro headwinds and a 69% year-over-year stock decline, while others acknowledged the company’s cost discipline and strategic adaptability.
