Is Opendoor at $2 the next millionaire-maker Nasdaq stock?
The Nasdaq‘s hosted its fair share of millionaire-making stocks over the past couple of decades. From Netflix and Tesla to Nvidia, the right stock pick can deliver returns that are nothing short of extraordinary.
One Nasdaq stock that’s now being talked up as having 100-bagger potential is Opendoor Technologies (NASDAQ: OPEN). It has been doing the rounds on Reddit’s WallStreetBets page, where retail traders gather to discuss meme stocks and other high-risk trading strategies.
This recent attention has seen the Opendoor share price surge 349% in just one month. Traders are comparing the stock to Carvana (NYSE: CVNA), the online used car retailer whose shares have exploded by nearly 7,200% since the start of 2023.
That means anyone who invested $14,000 back then is sitting on $1m today.
Similarities
To be fair, I do see a couple of similarities. Opendoor buys and resells homes, while Carvana buys and resells used cars. Both operate in capital-intensive industries and have relied on debt to fund growth.
Back in 2022-23, when interest rates soared, the cost of carrying that debt ballooned and both found themselves in trouble. Their survival was in doubt (Carvana came close to bankruptcy).
Yet, while Carvana has performed a Lazarus-like resurrection from its 98% stock plunge between 2021 and 2022, Opendoor remains 93% beneath its all-time high. Therefore, it has the potential to do a Carvana, according to the meme stock traders.
Running the numbers
Looking at the numbers though, that’s where the similarities end for me. Carvana reported $13.7bn in revenue in 2024, which was 27% higher than the year before. Crucially, it generated a profit, and earnings per share are forecast to rise 60% this year and 24% in 2026.
By contrast, Opendoor has never turned a profit. Revenue slumped nearly 26% last year to $5.2bn, and is expected to decline another 5% this year. And while Wall Street expects solid revenue growth after that, profits remain absent as far as the eye can see.
The business model of flipping houses in America hasn’t been proven to work profitably yet, at least for Opendoor. This makes the stock very risky (and why it was trading for less than $1 just last month).
Of course, if the firm makes great strides down the path to profitability, the stock could do really well. Conversely, Carvana may struggle if a US recession negatively impacts the car-buying market. It’s also trading at a premium 42 times forward earnings.
But looking at both stocks as a long-term investor, I much prefer Carvana. It’s at least profitable and is growing at a faster rate than Opendoor.
The online car retailer also still has its founder-CEO in charge, which I like to see, whereas Opendoor’s founder left the firm in 2024.
Final thoughts
Of course, I accept it’s perfectly possible that Opendoor rockets much higher in the near term. Meme-stock rallies can defy logic and make traders a lot of money. Good for them, I say.
But I’m writing from the position of a long-term investor (with a horizon of five to 10 years). And over that period, I don’t see Opendoor becoming the next millionaire-maker stock.
I see far more attractive candidates elsewhere for building wealth in my own portfolio.
The post Is Opendoor at $2 the next millionaire-maker Nasdaq stock? appeared first on The Motley Fool UK.
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Ben McPoland has positions in Nvidia. The Motley Fool UK has recommended Nvidia and Tesla. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.
