Opendoor Technologies Inc (NASDAQ: OPEN) has been in a sharp uptrend this month as retail investors continue to flock into the online platform that buys and sells residential real estate.
Much of the optimism has been related to market expert Eric Jackson’s recent remarks that OPEN shares could eventually hit $82 – implying a nearly 1,500% upside from the current price.
Jackson likened Opendoor to early-stage Carvana, adding it looks right on the cusp of a “legitimate turnaround.”
But for Opendoor stock to hit $82, the firm will need to deliver extraordinary financial performance – far beyond its current trajectory.
With a market cap of just $3.8 billion and persistent losses, the math behind this bullish call raises serious questions.
What would Opendoor stock need to touch $82 valuation
Opendoor Technologies must balloon its market cap to roughly $60 billion for its stock price to hit $82 – assuming its current share count remains unchanged.
This would mean a more than 15 times increase versus the present valuation over the next few years.
To support that market cap, the Nasdaq-listed firm will need to generate multi-billion-dollar in free cash flow, sustain double-digit profit margins, and grow annual revenue well beyond the current run-rate of $6.4 billion.
According to Eric Jackson, Opendoor could touch $1.4 billion in free cash flow by 2026, but that would require a margin of over 20%, which is unheard of in “iBuying” – a market where margins are notoriously thin and volatility is often high.
In the latest reported quarter, the company’s gross margin was just 8.2%, and its net loss stood at $29 million, casting doubt on OPEN shares’ ability to hit $82.
Why OPEN shares may fail to print $82 anytime soon
While the recent rally, fuelled by retail enthusiasm and Jackson’s viral social media post, has OPEN shares trading at more than 5x their price in mid-July, the $82 price target looks far-fetched even for the long-term.
The online platform for real estate transactions continues to face profitability headwinds, declining home sales, and macro headwinds in the housing market.
In Q2, Opendoor Technologies sold 4,299 homes in Q2, but its inventory dropped 32% year-over-year, and home acquisitions fell 63%.
These trends suggest limited growth momentum. Moreover, the company’s adjusted EBITDA was a modest $23 million, and its guidance for the third quarter points to a return to negative EBITDA.
Jackson’s optimism hinges on a rapid turnaround, but OPEN’s business model – buying and reselling homes at scale – is capital-intensive and highly sensitive to interest rates and housing cycles.
Investors should remain wary of chasing that $82 price objective also because Wall Street currently rates Opendoor stock at “underweight.”
Even the highest price target on OPEN shares sits at $1.60 only, indicating potential downside of nearly 70% from here.
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