Why Opendoor Technologies Stock Is Plummeting Today

Key Points

• Opendoor Technologies stock has seen incredible gains recently, but the rally is losing some steam today.

• The company's valuation surge was driven by backing from a hedge fund manager and meme-stock momentum, but investors are taking profits today.

• Opendoor's meme-driven rally could resume, but the stock looks incredibly risky right now.

• 10 stocks we like better than Opendoor Technologies ›

Opendoor Technologies (NASDAQ: OPEN) stock is getting hit with a big pullback. The company's share price was down 20.1% as of 1:15 p.m. ET. At the same point in the day's trading, the S&P 500 index was up 0.4%, and the Nasdaq Composite index was up 0.1%.

Opendoor Technologies has recently gained favor as a meme stock and seen incredible valuation gains, but the company's share price is pulling back today as investors take profits on recent gains. Despite big sell-offs in today's session, the stock is still up 330% over the last month.

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Image source: Getty Images.

Opendoor stock sinks as meme rally loses steam

Opendoor became a hot meme-stock play after hedge fund manager Eric Jackson began championing the beaten-down stock as a potentially explosive turnaround play. While the company's share price has seen an incredible rally recently, it's still down roughly 81% over the last year of trading.

Highly speculative meme-stock trades have recently become popular again, and some investors have been betting that the potential for lower interest rates and other market catalysts will power strong rallies for some companies with beaten-down valuations. Investors in meme stocks have scored some big wins with Opendoor and other companies recently, but today's big pullback for the company's share price highlights the potential for big downside volatility at this stage in the game.

What's next for Opendoor Technologies?

Opendoor Technologies stock will likely continue to be incredibly volatile in the near term. While nothing substantial has changed about the company's fundamentals since its massive meme-stock rally, investors will get a detailed look at the company's business with the publication of its second-quarter results after the market closes on Aug. 5. The company could treat its big stock rally as an opportunity to sell shares and strengthen its balance sheet, but the dilutive impact could wind up dashing the hopes of investors hoping to score big short-term gains.

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Keith Noonan 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.