Why Opendoor Stock Dropped 19% in July
The housing market is still under pressure.
Overview
Opendoor Technologies (NASDAQ: OPEN) stock lost 19% in July, according to data provided by S&P Global Market Intelligence. The market is worried about high interest rates, stubborn high mortgage rates, and whether or not Opendoor can make a comeback in this climate. The stock has already fallen further after its second-quarter earnings report on Aug. 4.
Opendoor is an ibuyer, which means it buys up homes, renovates them, and flips them for a quick resale and profit. It has expanded to partnerships with on-the-ground real estate agents, a mortgage product, and innovative services like its highly successful cash now, more later product that gives home sellers the option to get cash for their homes at sale to Opendoor, with the potential for more when Opendoor sells it.
Details
New CEO Kaz Nejatian has made several moves to get the company back in growth mode despite the challenging operating environment. He's leaning more into artificial intelligence (AI) to become more efficient and cut costs, has launched the cash now, more later product, and, most critically, has revamped the model to focus on volume rather than spread. While spread, or the amount the company buys a home for vs. how much it sells for, would seem like the logical way to go economically, there were fewer homes to buy, and they weren't the best ones. Nejatian's way gets better homes and smaller spreads for faster sales, driving a positive cycle.
Source
Originally published at www.fool.com.