Where I'd Buy Opendoor Technologies After 'Wildly Volatile' Turn
The online real estate firm has seen some wild swings lately and a buying opportunity might be ahead.
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When I get to the bottom, I go back to the top of the slide
Where I stop, and I turn, and I go for a ride
'Till I get back to the bottom, and I see you again
Yeah, yeah, yeah!
- The Beatles, "Helter Skelter," 1968
Opendoor Technologies
On Wednesday, Opendoor Technologies (OPEN) ran up 16%. That came after a 3.7% drop on Friday followed by a 12.4% drop on Monday and a 15.4% drop on Tuesday. The shares apexed for the recent cycle at $10.87 in mid-September after having traded as low as $0.51 in June. Market cap? It was a little over $6 billion after the closing bell on Wednesday night. It could be significantly higher or significantly lower by the time you read this.
The chair and CEO, Carrie Wheeler, stepped down from those roles in mid-August. The market celebrated that news, though it was not really unexpected, as the firm had begun a CEO succession search months ago at Wheeler's request. About two weeks ago, Kaz Nejatian, former COO of Shopify (SHOP) , was appointed CEO of Opendoor. In addition, founders Keith Rabois and Eric Wu returned to the board of directors with Rabois taking on the role of chairman. On top of that, Wu and Khosla Ventures announced a new $40 million investment in the firm through a private placement.
Stability Did Not Last Long
On September 19, CFO Selim Freiha stepped down. By September 20, Christy Schwartz returned to her former role as interim CFO. Schwartz had previously served as interim CFO for this firm from December 2022 through November 2024. Schwartz was told that this role will end on the earlier of either May 15, 2026 or 30 days after a new CFO is appointed. She was offered an annual base salary of $1.2 million to take on the temporary position.
Who Are These Guys?
Opendoor Technologies describes itself as an e-commerce platform developed to serve real estate markets. The firm is engaged in providing property buyers and sellers a digital, on-demand service, Primary services include Sell to Opendoor, List with Opendoor and Opendoor Marketplace.
While the listing and marketplace services might more or less be self-explanatory, the Sell to Opendoor service allows the firm to act as a middleman between the seller and ultimate buyer. Kind of like an online flipper. This relieves the seller of having to clean and make repairs to the home, I gather at a price. The firm is based in Tempe, Arizona.
Earnings and Fundamentals
In early August, OPEN posted a GAAP EPS of -$0.04 on revenue of $1.6 billion. That was a one penny miss on a beat, but a beat that was only good for year-over-year growth of 6%.
The firm is expected to report its third quarter financial results in early November. Wall Street is looking for an EPS of -$0.07 on revenue of $882 million. That would compare to -$0.10 for the year-ago period but show an annual contraction in revenue generation of about 36%.
Why has the stock been wildly volatile? That's obvious. Why has the general trend for the share price been to the upside? That's easy, too. OPEN entered September with more than 26% of the entire float held in short positions. OPEN has become something of a meme stock.
That does not mean that the stock is trash. The firm has been free cash flow positive over the trailing 12 months and for three of the past four years. The balance sheet is not awful either. While the firm does have long-term debt of more than $1.6 billion and a cash position of just $789 million, the current situation is healthy enough. The cash position would be more than enough if cash flows remain positive to whittle down the firm's $550 million is short-term debt and refinance a portion if need be.
The Chart
I am interested in maybe taking on a small, long position in this name. I would consider investing down to the 50-day SMA after a break of the 21-day EMA.
Should the 21-day EMA hold? That means that the swing crowd is defending the stock there and will be the driver for this stock as they have been. In my opinion, that would be a tradeable event, but I would not reach for a home run.
If I can get in around the $7.25 to $8.00 area, I am out at $10.50. No emotion. Just execution. Of course, I am also out should that thin green line crack, to then wait for a test of the thin blue line. Rock on.
At the time of publication, Guilfoyle had no positions in any securities mentioned.
