3 Reasons Opendoor Technologies Stock Could Move Higher Before Nov. 6

Key Points

• Opendoor has captivated investors in recent weeks as its stock has soared, after looking like it was left for dead.

• Meme stock investors helped spark a rally in the beaten-down stock.

• A new management team has big ideas for the company.

• 10 stocks we like better than Opendoor Technologies ›

In just a few months, Opendoor Technologies (NASDAQ: OPEN) has gone from a broken company on the verge of being delisted from the Nasdaq to one of the hottest stock stories of the year.

In July, retail investors began piling into the online home-flipping stock after an argument posited by hedge fund manager Eric Jackson began to gain traction online. Jackson argued that Opendoor could turn into the next Carvana, referring to the 100x gain the online used car dealer made after avoiding bankruptcy in late 2022.

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A meme stock was born as daily trading volume skyrocketed, at one point exceeding the number of shares outstanding, and Opendoor soared as well. That momentum directly led to a change in the business.

First, CEO Carrie Wheeler stepped down, and earlier this month, the company brought in a new management team, tapping Shopify chief operating officer Kaz Nejatian to serve as its new CEO, and bringing back founders Eric Wu and Keith Rabois to serve on the board of directors, with Rabois as chair.

Opendoor shares are already up nearly 20 times from their bottom, meaning they are more than halfway to Jackson's target, at least by one measurement. Could the hot stock keep climbing? Let's look at three key drivers that could move the stock even higher before its next earnings report, expected on Nov. 6.

Image source: Getty Images.

1. Mortgage rates could come down

Perhaps the biggest component in the bull case for Opendoor is its relationship to the housing market. The company's fortunes are closely tied to the supply and demand for homes, and the direction of housing prices.

The stock initially surged out of the gate after it went public in 2020 when the housing market was on fire during the pandemic. However, that market crashed in 2022 as interest rates rose and sales of existing homes tumbled. Opendoor makes money from selling homes for more than it purchases them for, and by collecting fees for services, so it benefits from upward pressure in the housing market.

Falling mortgage rates could make both of those things happen. In fact, rates have already come down to one-year lows, and the Federal Reserve expects to cut its benchmark interest rates two more times this year. Anticipation of lower rates or signs of housing market recovery could also push Opendoor stock higher.

2. Management could make real changes

Nejatian intends to hit the ground running. He has been active on the social media platform X, and the company has already expanded the Opendoor platform to all 50 states, up from just around 50 markets previously. The company also brought in a new chief financial officer, naming Christy Schwartz as the interim replacement, effective Sept. 30, succeeding Selim Freiha.

Rabois, the new board chairman, said in an interview on CNBC that the company has become too bloated and that it could cut its workforce from 1,400 all the way down to 200. Investors should expect some more announcements from the management team in the coming weeks. The right one could send the stock soaring again.

3. It's a meme stock investors haven't left

There's still plenty of energy behind Opendoor from the meme-stock crowd, which is sometimes referred to as the "$OPEN Army."

The stock is still trading at huge daily volumes, averaging 325 million over the last three months, much higher than before gaining interest from the meme stock investors. Opendoor also continues to look like a battleground stock with 26% of the float sold short, and that has the potential to drive a short squeeze as well.

Meme stock movements are notoriously unpredictable, but the legions of Opendoor bulls who have piled into the shares in the last few months are clearly an asset for the company and the stock.

Opendoor is still high risk

The reasons above are all potential drivers for the stock over the next few weeks, but Opendoor remains a high-risk investment. The meteoric gains have come entirely on improving expectations, which may or may not be justified, rather than any meaningful improvement in fundamentals. In fact, when the company gave third-quarter guidance in August, it called for a significant decline in revenue, showing that it's scaling the business back as the housing market remains weak.

Observers will see if Nejatian and Rabois can work up a real turnaround plan in the coming weeks, but there is room for the stock to move higher, especially if management can show signs of progress.

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Jeremy Bowman has positions in Carvana and Shopify. The Motley Fool has positions in and recommends Shopify. The Motley Fool recommends Nasdaq. The Motley Fool has a disclosure policy.