Opendoor: A Generational Buy For Bold, Contrarian, Long-Term Investors

Summary

• In 2022, a sharp jump in mortgage rates is driving an unprecedented decline in housing market activity and sale prices. Naturally, Opendoor, an iBuyer, is selling off.
• Opendoor is facing several headwinds - shrinking volumes, home price depreciation, higher interest expense, longer holding periods, greater marketing expense, and ballooning G&A expense.
• As of Q2, Opendoor held an inventory of ~17K homes ($6.65B), and with median prices across major metros contracting ~10-20%, the fears of massive inventory markdowns are warranted.
• A big headline net loss is coming for Q3, along with massive inventory markdowns (~$0.5-1B). And this is why Opendoor is trading at less than its net cash balance of $2.2B.
• With that said, Opendoor has ample liquidity to get through this downturn in the housing market. At less than a $1:$1 valuation, Opendoor is offering an asymmetric risk/reward bet for bold, contrarian, long-term investors. I rate OPEN stock a generational buy at $3.
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Analyst’s Disclosure:I/we have a beneficial long position in the shares of OPEN, AMZN, AAPL, GOOG 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.

Opendoor is one of my largest holdings, and I plan to accumulate more shares over the coming weeks.