Opendoor (OPEN) Stock: Jim Cramer Says Stay Away From Opendoor Despite New CEO

TLDR

Table of Contents

Opendoor Technologies stock surged from $0.50 to nearly $10 after hitting 95% losses from all-time highs
New CEO Kaz Nejatian from Shopify plans to pivot the company toward AI-powered real estate tools
The company posted 8.2% gross margins on $1.6 billion revenue, worse than most grocery stores
Jim Cramer warned investors to avoid the stock, calling it a “meme stock” situation
Current $7 billion market cap may be too high given the unproven AI business model and ongoing losses

Opendoor Technologies stock has been on a roller coaster ride that would make even seasoned traders dizzy. The real estate platform’s shares plummeted to around $0.50 earlier this year, down more than 95% from all-time highs.

But something changed. The stock rocketed up over 10 times from those lows, recently trading near $10 per share.

What sparked this dramatic turnaround? Two words: new leadership and artificial intelligence.

Last week, Opendoor announced Kaz Nejatian as its new CEO. Nejatian spent six years at Shopify, most recently as chief operating officer.

At Shopify, he helped build a culture of innovation. The company grabbed market share in e-commerce, website software, and online payments under his watch.

Now Nejatian wants to bring that same innovation to real estate. But he’s not sticking with Opendoor’s original playbook.

The AI Pivot Strategy

Opendoor’s original business model was simple in concept but tough in execution. The company made cash offers to home sellers, hoping to earn a profit when reselling to buyers later.

This iBuying model proved challenging. It required massive capital to hold home inventory and delivered razor-thin margins.

Nejatian plans to build on this foundation but expand into new territory. He wants to create AI-powered tools for real estate agents, sellers, and buyers.

Instead of just flipping houses, Opendoor aims to become a software partner. This would help real estate stakeholders throughout the buying process.

The company hopes to improve what many consider an outdated, paperwork-heavy industry. If successful, it could tap into the trillions of dollars that change hands in real estate transactions each year.

The Numbers Tell a Different Story

Despite the stock surge and AI promises, Opendoor’s financials remain concerning. Last quarter brought $1.6 billion in revenue but only $128 million in gross profit.

That works out to an 8.2% gross margin. For context, that’s worse than most grocery stores, which are famous for running on thin margins.

The company has historically struggled to turn a profit. Its capital-intensive business model of buying and holding home inventory has proven difficult to scale profitably.

Around 4 million existing homes sell in the United States annually. Before interest rate hikes froze the market, that number was closer to 6 million.

If Opendoor can capture even a small slice of these transactions through its new AI model, the potential could be massive. But that’s a big if.

Market Skepticism Grows

Not everyone is buying into the Opendoor revival story. CNBC’s Jim Cramer recently warned investors to stay away.

When a caller mentioned viewing the stock as a speculative play, Cramer was blunt. “We don’t want to be in a meme stock,” he said.

Cramer has been critical of Opendoor before. In August, he called it a meme stock and questioned the circumstances around previous leadership changes.

His warnings carry weight given Opendoor’s current $7 billion market cap. That valuation seems steep for a company losing money with an unproven new business model.

For comparison, Zillow trades at an $18 billion market cap despite its established real estate portal business. Zillow actually captures much of the existing profit in the industry through its popular platform.

The new CEO Nejatian faces the challenge of proving his AI strategy can work in practice, not just in theory.

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