OpenDoor Stock Surged 900% But Will It Built to Last?

But here’s the truth: meme stocks move high and move fast, yes, but they rarely, if ever, have the fundamentals to back the price move. So, eventually, when the internet’s notoriously short attention spans kick in, meme stocks tend to crash hard. 

We saw this in all the examples I mentioned earlier. But is it the case with Opendoor? 

OpenDoor’s Financials

Well, let’s check its financials to see. 

Opendoor recently released its Q2 ‘25 financials, and to be perfectly honest, it’s nothing special. 

Revenue is up 4% year over year, reaching $1.6 billion. The bottom line saw a 66% improvement, but still ended at a $29 million net loss. Now, if you’d only been given that information, you’d think it’s a pretty decent result, right? 

Well, the Q2 financials came with a nasty surprise: namely, Q3’s revenue guidance of $800 to $875 million. To put that into perspective, Q3 2024 reported $1.5 billion in revenue, so this guidance constitutes a massive 44% cut on the midpoint. 

Even worse, the company has never reported a profitable quarter, so poor guidance erases any hope that it will in Q3 ‘25. 

But maybe there’s a silver lining somewhere else? 

Well, its cash flow statement doesn’t necessarily incite much excitement, other than the positive “other working capital” line item that led to a positive free cash flow, but that’s likely a reflection of Opendoor’s high inventory turnover and operational dynamics. We’ve seen that fluctuate a few times in the past five years, and it’s not necessarily a positive indicator for the company’s cash management. 

Then, there’s its 3.31 debt-to-equity ratio, which means for every $1 of equity, Opendoor carries $3.31 of debt. It also has a 0.36 price-to-sales ratio, which, in usual circumstances, marks out the stock as cheap. However, with Q3’s guidance being that low and still no profitability in sight, that 0.36 might as well be printed on a red flag. 

Still, there are some positives. Opendoor has consistently beaten analyst expectations for the past four quarters. They’re also expecting that the company’s net losses will shrink in the next two years. Its operating expenses are also on a downward trajectory, thanks to its aggressive cost-cutting measures, with Q2 reporting a 65% improvement from $402 million to $141 million. And finally, it reached adjusted EBITDA profitability this quarter.  

But to be perfectly honest, these positives don’t support the stock’s massive price boost.

Tailwinds

But are there any tailwinds that can buoy Opendoor into profitable territory in the future? 

Housing Market Stabilisation

Well, the housing market is expected to remain “largely frozen” in 2025, according to J.P. Morgan. Mortgage rates are high, inventory is low, and materials are getting more expensive. 

Now, there’s really no indication that this will change anytime soon, but should things get better, Opendoor may see increased transaction volume, which can potentially expand gross profits per home sold and overall margin. 

AI Improvements

Next, we have to remember that Opendoor is using its proprietary algorithm for pricing models, on-site inspections, and renovation decisions, so any improvement in that front may have a positive impact on its path to profitability. 

Gen Z Appeal

Lastly, and this is more of a speculative assessment on my part, is Opendoor’s potential appeal to newer generations. Its all-digital platform fits the always-online zeitgeist well, so younger, more tech-savvy generations like Millennials and Gen Zs might gravitate towards it. I mean, click-to-sell and click-to-buy, with no need to meet anyone in person? That’s practically designed for the upcoming home-buying generation. 

Headwinds

Now, as for headwinds, well, I’ve covered most of them earlier. Higher mortgage rates, more expensive materials, and unfavourable macroeconomic conditions, combined with its status as a pre-income company with no solid path to profitability yet, work against it. 

The iBuying model also has thin gross margins. Even NON-GAAP adjustments barely make any difference in the overall numbers. 

Verdict

At the end of the day, I’m a conservative investor. While it’s fascinating to watch meme stocks soar to sky-high prices like fireworks, I’ll be doing so from the sidelines. That way, I won’t be anywhere near the stock when it explodes and comes crashing back down to earth. 

So, I’m rating Opendoor a sell. I just don’t see how its fundamentals and prospects justify its current price. 

If you bought it at the top, it might be better to cut your losses now than later. But if you’re hoping for another rebound like what we saw with GameStop, BlackBerry, or AMC – well, it’s your money, and you’re free to do whatever you want with it.