Is Opendoor Technologies Stock a Buy Below $10?

Core Viewpoint - Opendoor Technologies has experienced a significant stock price surge, increasing around 500% year-to-date, but still faces challenges in profitability and competition in the real estate market [2][12]. Company Overview - Opendoor went public in 2020 and has seen its stock price drop over 95% from all-time highs before a recent resurgence driven by large investors and individual traders [1]. - The company currently has a market capitalization of $7 billion and a stock price of $9.50 as of September 15, which is still below its debut price after merging with a SPAC [2]. Leadership Changes - The company ousted its previous CEO, Carrie Wheeler, in August and appointed Kaz Nejatian, former COO of Shopify, as the new CEO [2][3]. - Nejatian plans to eliminate the work-from-home strategy to foster innovation and intends to implement strategies similar to those that worked at Shopify [4]. Cost-Cutting Measures - Opendoor aims to cut costs by reducing employee numbers, which is seen as a barrier to innovation [5]. - The company reported a revenue of $1.6 billion last quarter but has low gross profit margins, with a gross profit of only $128 million, or 8.2% [7]. Financial Performance - Opendoor has not generated positive net income over the past 12 months, posting a loss of $29 million before taxes last quarter [8]. - The company spent $86 million on marketing, $28 million on general overhead, and $21 million on product development last quarter [8]. Future Growth Strategy - In the short term, Opendoor will focus on cost-cutting to achieve profitability, while in the long term, it aims to expand into services like title services and mortgages to enhance home transactions [9]. - The company’s ability to grow gross profit and convert it into net income will be crucial for its long-term success [10]. Valuation Insights - Opendoor's stock is currently valued at a price-to-gross-profit (P/GP) ratio of close to 20, indicating a premium valuation for a company undergoing a turnaround [13]. - Despite the recent hiring of a new CEO and plans for cost-cutting, the steep valuation and historical performance suggest caution for potential investors [14].