Should you buy Opendoor stock? (July 2024)

Published first at https://www.3minutebreakdowns.com
Opendoor stock analysis. Ticker: $OPEN

Opendoor stock has fallen 95% since 2021 taking the company’s market cap to $1.3 billion. And fundamentally, the stock is beginning to look cheap. The enterprise value to revenue ratio is among the lowest multiples in the market. Gross margins are low but the enterprise value to gross profit is only 1.6 times. And Opendoor holds a decent amount of assets as well. Net cash is almost half the market cap. And tangible book value is about $900 million. But Opendoor stock is cheap for a reason, the market simply doesn’t trust this business model.

Opendoor is often referred to as a “house flipping” business, but in reality it’s much more like a market maker. The company provides liquidity by buying and selling assets when its customers want to transact. This allows customers to transact much more quickly and easily than having to wait for someone on the other side of the trade. And like a market maker, Opendoor aims to generate a spread on transactions which ends up being about 5% to 7%.

However, there are problems with this approach. The first is that many homeowners don’t want to sacrifice profits for convenience. Properties hold significant value and sellers would rather wait for the right price than accept the first offer from Opendoor. Of course, there are exceptions such as when customers need to move quickly, but they’re less common.

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