1 Growth Stock Down 95% to Buy Right Now

Opendoor technologies (OPEN -1.28%) started its publicly traded life on a high note. The cloud-based residential real estate marketer’s stock has tripled in its first eight months on the market.

But the joy did not last long. Shares of Opendoor are down 94.6% from their February 2021 peak.

The stock isn’t an obvious slam dunk today, but I see signs of better days ahead. Opendoor is worth considering if you’re interested in a robust recovery effort. A small, speculative investment today could yield impressive long-term returns.

The story so far

Opendoor has been around since 2014, starting with local home reseller services in Phoenix and Dallas. The company wants to disrupt the massive home buying market by offering a simple alternative – skip the traditional process of listing, fixing and showing your home and sell it on Opendoor in a few clicks. The company pays cash up front, takes care of the cleanup and necessary repairs, then finds a new owner.

After six years of accelerating expansion, the company decided to go national and join the stock market in December 2020. Investors initially embraced the seller-friendly platform despite the economic pressures of the COVID-19 pandemic. But the rising housing market stagnated in 2021, collapsed in 2022, and has settled at an all-time low for existing home sales since then.

The timing of that downtrend hit Opendoor like a freight train. Subsequent revenue peaked at $16.5 billion in the fall of 2022. After seven consecutive quarters of declining sales, that number has fallen to $4.5 billion.

A snapshot of the Opendoor recovery

The housing market is still tough, but Opendoor is starting to change your financial worries.

Sales are still slowing, but year-over-year declines have been easing in the past two reports. Earnings before interest, taxes, depreciation and amortization (EBITDA) is just below break-even. If Opendoor can follow the top trend, sales should start to rise again and positive profits would follow.

The number of home sales may be down, but median prices continue to rise. Against this mixed market backdrop, Opendoor refined its marketing message. The previous focus on direct response campaigns has shifted to brand awareness. People have seen online home selling services before from bigger rivals such as The Zillow Group and Redfinand potential customers often skip Opendoor’s detailed service descriptions to go with a more familiar brand. The stronger brand awareness push is paying off, as seen in the company’s improving financial trends.

The company is also adding new services. Direct cash offers are now paired with the option to list the home on the traditional multiple listing service (MLS) for 30 days. This option has proven attractive, with home sellers hoping for a higher payout and a successful listing earning Opendoor a commission without the financial burden of holding the property for a period.

This service is new, but Opendoor has seen a 10% increase in its Net Promoter Score (NPS) since launch.

Opendoor leads the way forward

Opendoor is finding better ways to run its business in this challenging real estate market. Meanwhile, both Zillow and Redfin have shut down their competing iBuyer services to refocus on MLS listings. Their exit leaves Opendoor with fewer competitors and an easier path for building its brand.

The road ahead is full of potholes and I can’t guarantee that the Opendoor will drive past them without breaking an axle. But I like the company’s chances of succeeding in a less crowded industry, its financial trends are starting to point in an optimistic direction, and the stock is priced for absolute disaster. These are three good reasons to give Opendoor stock a shot.

If nothing else, former rivals like Redfin and Zillow could decide to get back into the iBuyer market via acquisition, so as to create buy targets on this stock. So you definitely shouldn’t bet the farm and all your chickens on this stock, but Opendoor is worth a modest investment today. That bet could pay huge dividends if this turns out to be the low point in Opendoor’s potentially disruptive adventures.