Why Opendoor Technologies Stock Plummeted 11% Today
Key Points
Opendoor stock has been sliding for a week, down nearly 30% since last Wednesday
Data from Redfin shows the housing market has plateaued.
A slow market means Opendoor must sit on the homes it owns, increasing operating costs.
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Shares of Opendoor Technologies (NASDAQ: OPEN) fell on Wednesday, finishing down 11%. The slide came as the S&P 500 (SNPINDEX: ^GSPC) gained 0.3% and the Nasdaq Composite (NASDAQINDEX: ^IXIC) rose 0.5%.
The real estate company Redfin released a report yesterday detailing a soft housing market, with sales and listings plateauing.
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Open needs to move its inventory
Redfin reported that home sales and new listings were little changed in October from the month before and that "housing-market activity is plateauing as Americans grapple with high costs and economic uncertainty." The company said that while the last few years have seen the market slow, this "past year has been especially stagnant."
Image source: Getty Images.
That's a problem for Opendoor, which sits on billions in housing inventory that it needs to move. The company's top and bottom lines are negatively impacted by the slowed activity.
Opendoor still has a lot to prove
While the digital real estate disruptor operates in a market with genuine potential for innovation, the economics of its model remain unproven. The company is operating at a loss and relies heavily on debt. I would avoid the stock unless you have an exceptionally high risk tolerance.
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Johnny Rice 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.
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