Opendoor Stock Has the Potential to 20X Your Money

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Throughout my investment career, I've seen a lot of irrational selloffs on Wall Street. But last week's Opendoor (NASDAQ:OPEN) selloff was unlike anything I've seen before. So let me cut to the chase: I firmly believe buying the dip in Opendoor stock today could 20X your money over the next few years.

Yep, you read that right. By my math, Opendoor stock has 20X return potential from current levels. This may be one of the biggest investment opportunities I've ever come across.

Look, I'm so bullish on OPEN stock that I feel compelled to tell you all about it. This isn't just an ordinary investment either. It belongs to my flagship Innovation Investor research service. And in a special update last week, I doubled down on my Opendoor conviction. It's such an opportunity right now that I can't sit idly by and wait for you to subscribe to Innovation Investor to tell you to buy this dip with both hands.

Let me explain…

Why We're All About Opendoor Stock

The Opendoor (OPEN) website is open on a smartphone that is resting on top of a map.

Source: Tada Images / Shutterstock.com

For those who are unfamiliar, Opendoor is the world's largest iBuyer. The company uses technology and data science to virtually buy homes from sellers. And then it turns around and uses that same approach to sell those homes to prospective buyers.

We love this business model. We think it's genius because it dramatically improves the current, detested archaic home-shopping model. Specifically, Opendoor makes the experience:

Cheaper: It eliminates profit-taking middlemen – real estate agents – and replaces their 6% commission with a 5% flat transaction fee.
Faster: Opendoor's advanced data science methods can accurately price a home in minutes. This means sellers can close a home sale in as few as three days.
Easier: It allows folks to sell their home from their cellphone with just a few clicks.
Simpler: Opendoor streamlines the home-selling process. It transforms the disjointed multi-party approach into a unified procedure. That means it's between just the seller and Opendoor.
More convenient: It allows sellers to choose their closing dates and escrow periods. This grants them the flexibility to move on their own time.
More reliable: Opendoor's offers are all-cash, and its transactions never fall through because it "fails to qualify" – something that happens quite often in the home-selling process.

Opendoor is creating a superior way to buy and sell homes that is much more advantageous to consumers. It's the future of home shopping. By 2030, a large majority of buyers and sellers will use Opendoor to close home sales – much as shoppers today use Amazon (NASDAQ:AMZN) to buy goods, as opposed to going into Walmart (NYSE:WMT) or Target (NYSE:TGT).

To that end, we view Opendoor as an early stage "Amazon of Houses."

The company is already profitable on a gross- and EBITDA-margin basis, despite being in the first innings of its growth narrative. This powered 1,435% revenue growth last quarter. You read that right: Opendoor grew revenues by more than 1,400% last quarter. It operates on slim gross margins of about 10%. But on enough scale, that should produce enormous profits, as was the case with Amazon.

Its Fundamentals Are Phenomenal

Opendoor is also shielded from a housing market downturn, too. The company is very well-capitalized, with over $2.5 billion in cash on the balance sheet. And it has an unrivaled team of experts to navigate through choppy markets.

Opendoor's CEO is the former head of social products at Trulia.com. Its CTO is a Stanford PhD candidate who headed up data science at Square. The CPO used to run product at Netflix (NASDAQ:NFLX). Its CIO used to be managing director at both BlackRock (NYSE:BLK) and Citadel – two of the world's largest hedge funds. The engineering head formerly ran engineering at Lyft (NASDAQ:LYFT). The design lead previously headed up that same unit at Uber Eats. And the leader of research is a Stanford PhD with experience at Facebook and Google. Dozens upon dozens of former Amazon, Alphabet (NASDAQ:GOOG), Facebook, Apple (NASDAQ:AAPL), Microsoft (NASDAQ:MSFT), Block (NYSE:SQ), and Twitter employees are on staff at the company.

Big picture: We love Opendoor as a long-term investment. It is building the future of the real estate market, with a genius business model that should produce enormous profits at scale. And, perhaps most importantly, the company has the talent and resources to navigate turbulent housing markets and out-execute competitors.

End game, we see this as a $100-plus BILLION company. And that's under conservative modeling assumptions of 5% market share, 6% EBITDA margins and a 20X steady-state price-to-earnings multiple.

And you can buy that future giant now.

The Opportunity of a Lifetime?

Opendoor stock crashed last Friday, falling as much as 30% after the company reported what were stellar fourth-quarter numbers alongside an equally stellar first-quarter guide.

The company smashed fourth-quarter estimates, guided way above on first-quarter revenue and EBITDA and reported 1,435% revenue growth. Management said the company is growing so quickly that it is several years ahead of where management thought it would be at this point.

Fantastic stuff! Yet, the stock dropped almost 30%. What gives?

Well, Opendoor is growing so quickly – and management feels so emboldened – that the company is going "all in" on evolving into the "Amazon of Houses." Some view this move as super risky, considering it requires buying thousands of homes every quarter ahead of what some believe will be a slow housing market in 2022.

Essentially, investors are fearful that Opendoor is pressing the fast-forward button at the wrong time.

Such short-sighted thinking…

Let's remember that Opendoor survived the housing crisis of 2020 – when the real estate market basically froze – with much less capital than what it has today. Let's also remember that it is early March – more than halfway through the first quarter. And despite sluggish home sales year to date, Opendoor clearly isn't seeing any slowdown in its own operations. The company is guiding for 462% revenue growth this quarter, alongside improving gross margins and positive EBITDA.

And let's not forget that every major housing market forecaster – from the National Association of Realtors to Zillow (NASDAQ:Z) to Opendoor itself – believes the housing market will continue to grow in 2022.

Oh, and perhaps most importantly, real estate prices have a multi-century track record of increasing. This means that all Opendoor has to do to become truly enormous is survive a minor blip in the housing market about once every decade.

Time to Buy Opendoor Stock

Folks, no matter which way you slice it, this selloff in Opendoor stock is way overdone – and a huge opportunity.

For the value investors in the room, let me throw out these numbers.

Opendoor is currently valued at $4.8 billion. The company is going to do about $4.2 billion in sales this QUARTER alone. That means the stock is trading barely above its quarterly sales.

On a forward basis, Opendoor stock is now trading at what is likely 0.3X forward sales.

It doesn't get cheaper than that. It really doesn't. Macy's (NYSE:M) – the vestige of a dying brick-and-mortar retail industry that isn't growing sales – is also trading at 0.3X forward sales.

Let that sink in for a moment.

Opendoor – the leader in a burgeoning industry that is growing sales at a 400%-plus clip – is trading at the same sales multiple as Macy's – a commoditized retailer in a dying industry that isn't growing at all.

C'mon, folks… that's wild!

So much so that buying Opendoor stock today may just be the best thing you ever do as an investor.

On the date of publication, Luke Lango did not have (either directly or indirectly) any positions in the securities mentioned in this article.

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