This $5 Billion Company Is Trading Like a Penny Stock
Key Points
Opendoor Technologies has risen to a market cap north of $5 billion on its appeal as a meme stock this year.
The business itself is still languishing with revenue off by a third from its 2022 peak.
The valuation is stiff, but Wall Street pros see revenue rising 15% next year on narrowing losses.
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You don't expect stocks with large market caps to have small price tags, but Opendoor Technologies (NASDAQ: OPEN) is a jumbo shrimp contradiction in today's market waters. The home-flipping specialist has a market cap just above $5 billion, even though it's currently trading for just north of $5 per share.
Making things even more interesting, Opendoor traded as low as $0.51 in late June. It was definitely a penny stock at that point, but now it's a full-blown mid-cap stock. Its greater than tenfold jump in just a handful of months is breathtaking, and definitely worth a closer look.
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Turning a house into a home
Opendoor was born in an era of low mortgage rates and rising residential real estate prices. It was the ideal climate for its business model. Opendoor buys an undervalued home in an ascending neighborhood, spruces it up, and attempts to sell it at a price above its makeover expenses and carrying costs.
This business model has struggled in recent years. High interest rates have hurt affordability while also keeping homeowners from listing their properties. Even the country's largest online real estate portal gave this business a go before pulling out four years ago.
The stock chart has been impressive since its summertime low, but the fundamentals haven't kept up -- for now. Opendoor's rally has stemmed from being thrust into the speculative spotlight as a meme stock. The business itself is still awaiting a genuine turnaround.
Revenue is declining for the third consecutive year. Losses keep mounting. The market for secondhand homes remains characterized by a thin supply and equally tepid consumer demand. It won't always be that way. Mortgage rates have been inching lower even before the Fed began cutting rates in September. Analysts see Opendoor returning to revenue growth in 2026 with losses narrowing. The stock's valuation may be hard to justify in the current climate, but the near-term outlook is more jumbo than shrimp for Opendoor.
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Rick Munarriz 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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