Why I'm Long Opendoor Stock Through Zillow's Implosion

Nov. 04, 2021 10:48 AM ETOpendoor Technologies Inc. (OPEN), Z121 Comments
The Abstract Investor profile picture
The Abstract Investor


  • I make the case for holding Opendoor stock despite Zillow's recent pains in the iBuyer market amidst housing price headwinds.
  • Opendoor has demonstrated a distinct advantage in profitability on its home flipping compared to Zillow. I dig into why that may be.
  • Due to the low-margin nature of the business, a small difference in gross margins indicates vastly different turnover efficiencies. Opendoor has historically been the better run business.
  • Q3 may well be a difficult quarter for Opendoor too; that said, the long-term narrative is intact and the financial trends show sufficient indication of the business model working.
  • OPEN is substantially undervalued. It is a high-risk, high-reward play. We are long at the Abstract Portfolio.
  • Looking for a portfolio of ideas like this one? Members of The Abstract Portfolio get exclusive access to our model portfolio. Learn More »
Stairs leading to the house

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Zillow (NASDAQ:Z) posted its Q3 earnings results and they were not good. Zillow Offers, the company's iBuyer vertical, posted heavy losses. The company decided to exit the entire iBuying vertical after recording a -20% gross margin for the segment in Q3, citing excessive housing price

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The Abstract Investor profile picture
I pick growth stocks that benefit from transformational trends in technology and culture globally....Such trends can be digital transformation, demand for parallel processing computing power, e-sports consumption, adoption of solar energy, and digital banking amongst others. I tend to cast a wide net in order to be opportunistic and filter down to only the best stocks for a deeper dive analysis. My investment process is fundamentals-driven, bottom-up research, and I look for companies with innovative products/solutions, strong management teams, and category leaders with wide competitive moats....I've previously worked as an analyst at a financial services consultancy catering to the asset management industry. My role was to research disruptive growth stocks across the Internet, Software, Fintech, and Semiconductor Industries and make recommendations for a hedge fund client.I hold a Masters in Applied Finance from Singapore Management University and a Masters in Engineering from Imperial College London.

Disclosure: I/we have a beneficial long position in the shares of OPEN, SQ either through stock ownership, options, or other derivatives. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Additional disclosure: All articles, comments, and communication (Content) by "The Abstract Investor" (Blogger) and "The Abstract Portfolio"(Service) are for informational purposes only; you should not construe any such information or other material as legal, tax, investment, financial, or other advice. Nothing contained in the Content constitutes a solicitation, recommendation, endorsement, or offer to buy or sell any securities or other financial instruments in this or any other jurisdiction in which such solicitation or offer would be unlawful under the securities laws of such jurisdictions. All language contained in the "Content", including terms such as "Ratings", "Buy", and "Sell", constitute the personal opinions only of the Blogger and indicate a general nature of the information. The Blogger and Service are not registered or regulated under any governing body. Do your own research or seek the advice of a qualified professional, as necessary. You are responsible for your own investment decisions.

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