Is It Finally Time to Buy Opendoor Stock?

Is Opendoor Technologies (NASDAQ: OPEN) still a meme stock? The digital real estate disruptor's stock has fallen sharply from its high a few months ago, but it's still up 647% over the past year. It's been relatively steady over the past few weeks, including post the first-quarter earnings report. That suggests some stability, even at the elevated price. It's a signal that the market has confidence in its recent recovery efforts.

Is it time to buy the stock?

Getting faster

"Faster" was the theme of the company's first-quarter earnings call. CEO Kaz Nejatian reiterated that many times in different ways. He expounded on how the company has changed in the half-year or so that he's been there. He is taking Opendoor's direction from a forward-centered company that was reactive and slow to move as it tried to calculate where the macro environment was heading, to a now-centered company that lives in the present and works toward fast turnover.

Nejatian has created a roadmap for Opendoor's growth strategy, and moving faster underpins all of its goals. He feels the company had been falling short of its mission by looking for deeply discounted homes instead of great homes with high resale value, leading to low volume and homes that weren't that great. It got bogged down in slow resale and low margins. His new approach is to focus on volume instead of the spread between the buy price and the sell price, which should scale acquisitions, boost sales, and improve margins.

He identified three specific goals to measure improvement. Here's how it went in the first quarter: For scaling acquisitions, homes purchased increased 45% consecutively, and it had more than 5,000 acquisition contracts in the quarter, the highest since 2022. For improving unit economics and velocity, the percentage of homes on the market for more than 120 days fell from 33% the previous quarter to 10%, while the overall market remained at 33%. And for building operating leverage, fixed costs declined from the previous quarter and year over year, even as acquisitions scale.

While the fundamental change in the company is this move toward fast volume rather than spread, artificial intelligence (AI) is also playing a major role. The company is moving toward a lighter, more agile, and more cost-efficient platform, and management gave examples for how automation and AI are making the company work more efficiently.

Not there yet

There's still a lot to prove and a lot of risk. Revenue was still 37% down year over year in the quarter, and homes sold fell from 2,946 to 1,921. Homes purchased fell from 3,609 to 2,474, and it might just be a volume issue before it returns to revenue growth -- homes under contract increased from 1,050 last year to 1,939 this year at quarter's end. Gross margin improved from 8.6% to 10.1%, and adjusted net loss improved from $63 million to $49 million.

These are confidence-boosting results, and as Nejatian pointed out, they happened at a housing market low, demonstrating that the strategy works and that it's not just an upbeat market.

However, it's still in the early innings, and there are many moving pieces. Risk-tolerant investors might want to take a small position, but most investors should wait for more stability.

Jennifer Saibil has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.