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.

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One of those was Opendoor Technologies (NASDAQ: OPEN). Shares of the real estate platform soared nearly 200% to reach $34 in 2021, only to plunge 95% over the next two years.

Now though, meme stocks like this are back in vogue as a new speculative frenzy has taken over. Opendoor has jumped from $0.51 to just over $2 — a gain of 366% — in just under one month!

And it seems UK investors are keen not miss out because Opendoor was the second most-bought share on AJ Bell yesterday (22 July). It was ahead of both Nvidia and Tesla, and second only to National Grid.

Skinny-dipping

For those wondering, Opendoor is company that buys homes directly from sellers, does them up, and then resells them. It’s kind of like an online house-flipper.  

This model was all well and good when interest rates were low and house prices were rising fast. You probably don’t need me to tell you what happened to the loss-making firm when rates shot up at the fastest rate in decades during 2022–23. 

But let’s just say this iconic Warren Buffett phrase pretty much sums it up: “It’s only when the tide goes out that you discover who’s been swimming naked.”  

Turns out Opendoor left itself a little too open.

Still about

To be honest, I’d forgotten all about the company until recently. If asked, I would have probably guessed that it had either gone bust, been delisted, or taken over at some very low price (relative to its former valuation). 

But it’s still on the Nasdaq, and is now trending on Reddit’s WallStreetBets Page and other sites. It’s turning into the new favourite meme stock.

Unappealing financials

In Q1, revenue came in at $1.15bn, a 2% decline year on year. The adjusted net loss shrank from $80m to $63m, but the gross margin narrowed to 8.6%, down from 9.7% a year earlier. 

While understandable, given the house-flipping model, that structurally low gross margin doesn’t get me too excited as an investor. Especially when the business has never proven to be profitable. 

However, one upside of this stock market rally for Opendoor is that it could raise more money by issuing new shares. While this risks diluting existing investors, the firm could use the funds to shore up the balance sheet and potentially drive growth.

Beware meme stock mania

Finally, it’s worth noting that Opendoor was also the most sold stock on AJ Bell yesterday. This indicates that it’s likely being bought and sold as part of a day trading strategy.

As a long-term investor, I have no interest in trading speculative stocks. And with mounting threats to the global economy, I think we might be nearing peak meme stock mania.

Therefore, investors thinking about buying Opendoor shares might want to pack a towel, just in case the tide suddenly rushes out.

The post Meet the $2 stock up 366% that UK investors are piling into appeared first on The Twelfth Magpie.