A Growth Stock That Has Dropped 95% and Is Worth Buying Now

Opendoor Technologies is a company that specializes in providing a digital platform for buying and selling real estate. ( OPEN 0.78% ) began its journey as a publicly traded company on a positive note. Stock of the cloud-based housing properties The trader’s performance more than tripled during its initial eight months on the market.

However, the happiness was short-lived. Opendoor’s stock has plummeted by 94.6% since its peak in February 2021.

The stock may not be an immediate, sure-fire success right now, but there are indications of improvement on the horizon. If you’re keen on a strong recovery attempt, Opendoor is worth looking into. Making a modest, speculative investment today could potentially lead to significant profits over time.

The narrative up to this point

Opendoor, which began its operations in 2014, initially provided local home resale services in Phoenix and Dallas. The company’s aim is to revolutionize the vast homebuying industry by providing an easy alternative—avoiding the conventional steps of listing, repairing, and showcasing your home. Instead, you can sell directly to Opendoor with just a few clicks. They offer cash immediately, handle the cleaning and any required repairs, and then locate a new buyer.

Following six years of rapid growth, the company opted to expand across the country and enter the stock market in December 2020. Initially, investors welcomed the platform that favored sellers, even with the economic challenges posed by the COVID-19 pandemic. However, the booming real estate market slowed down in 2021, crashed in 2022, and has since stabilized at a historically low rate of existing home sales.

The timing of that downward trend impacted Opendoor severely. Their revenue, which reached its highest point at $16.5 billion in the fall of 2022, has now dropped to $4.5 billion after seven consecutive quarters of declining sales.

A glimpse into Opendoor’s resurgence

The real estate market remains challenging, yet Opendoor is beginning to improve its financial situation.

Sales continue to decline, but the year-over-year decreases have become smaller in the past two reports. Income prior to accounting for interest, taxes, depreciation, and amortization EBITDA is currently slightly under the break-even point. If Opendoor can maintain the upward trend in revenue, sales are likely to increase once more, leading to positive profits.

Although the quantity of home sales might be minimal, the average prices are still on the rise. In response to this mixed market environment, Opendoor has adjusted its marketing approach. Instead of concentrating on direct response campaigns, they are now emphasizing brand awareness. Consumers are already familiar with online home-selling services from bigger competitors like Zillow Group and Redfin Potential customers frequently overlook Opendoor’s in-depth service explanations in favor of choosing a brand they recognize better. However, the intensified efforts to increase brand awareness are proving successful, as evidenced by the company’s improving financial performance.

The company is expanding its offerings by introducing new services. In addition to straightforward cash offers, they now provide the option to list homes on the traditional multiple listing service (MLS) for 30 days. This option appeals to home sellers looking for a higher payout, and if the listing is successful, Opendoor earns a commission without the financial obligation of holding onto the property.

Although this service is new, Opendoor has experienced a 10% increase in its net promoter score (NPS) since its introduction.

Opendoor is paving the way for the future.

Opendoor is exploring more efficient methods to operate in the current difficult housing market. At the same time, Zillow and Redfin have shut down their rival iBuyer services to concentrate on MLS listings. Their departure reduces Opendoor’s competition, providing a clearer opportunity to enhance its brand presence.

The path forward is fraught with challenges, and I can’t promise that Opendoor will navigate them without any setbacks. However, I’m optimistic about the company’s potential success in a less competitive market. Its financial indicators are beginning to look promising, and the stock is currently valued as though it’s destined for failure. These are three compelling reasons to consider investing in Opendoor’s stock.

Alternatively, past competitors such as Redfin and Zillow might choose to re-enter the iBuyer market through acquisitions, thereby identifying potential acquisition candidates for this stock You certainly shouldn’t risk everything you have on this stock, but investing a small amount in Opendoor could be worthwhile today. If this is the lowest point in Opendoor’s potentially game-changing journey, that investment might yield significant returns.