Why Opendoor Technologies stock popped today

Actions of Opendoor technologies (OPEN 12.38%) were among the winners today after Fed Chairman Jerome Powell delivered dovish remarks on interest rates in a closely watched speech in Jackson Hole, Wyoming.

Investors in housing stocks anticipated news that the Federal Reserve will cut rates soon, and Powell’s adoption of rate cuts sent Opendoor and its real estate peers up today. As of 1:02 p.m. ET, shares of the online real estate flipper were up 13.1%.

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Opendoor gets a gift from the Fed

Opendoor’s business is buying and selling residential real estate, which makes the company very sensitive to mortgage rates. Shares of Opendoor tumbled as the Fed quickly raised rates in 2022 as demand for home purchases slowed significantly. Since then, the company has been streamlining its business, reducing inventory and laying off employees.

Home-flippers should also benefit from any effect on the housing market that pushes home prices higher, and generally lower rates do that, although home prices are now at record highs even with high mortgage rates. Regardless of price movement, lower rates will almost certainly boost home buying demand, which will benefit Opendoor.

Is Opendoor stock a buy?

Opendoor’s business has improved since the stock dipped in 2022, but it still faces challenges. In its strongly seasonal second quarter, it reported a $5 million loss in adjusted earnings before interest, taxes, depreciation and amortization (EBITDA), which was much better than the $168 million loss, but shows that the company is still struggling to turn a profit. .

It is accelerating its home buying, buying 4,771 homes in the second quarter, up 78% from a year earlier. This shows confidence in the housing market and its own demand, although an EBITDA loss is still expected in the third quarter.

However, management said: “We believe we are well positioned to benefit from any potential tailwinds from positive changes in interest rates.”

Opendoor remains a high-risk stock, but has upside potential in a healthier housing market. Don’t be surprised to see stocks continue to rise if investors get more good interest rate news.