Should You Buy Opendoor Technologies Stock Before Nov. 6?

Opendoor Technologies (NASDAQ: OPEN) runs one of the biggest real estate direct buying operations in the U.S., which involves purchasing homes from willing sellers and attempting to flip them for a profit. This business model works great when the housing market is strong, but elevated interest rates have made the last few years extremely difficult for the company.

Nevertheless, retail investors have used social media platforms like X (formerly Twitter) and Reddit to successfully promote stocks like GameStop and AMC in the past, and Opendoor is their latest target. The stock has surged by an eye-popping 1,300% from its 52-week low of $0.51 in June, and now trades at over $7.

On Nov. 6, Opendoor will release its operating results for the third quarter of 2025 (ended Sept. 30), which could influence the direction of its stock. Should investors take a position ahead of the report?

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Direct buying isn't a great business model

When a person wants to sell their house, they normally hire a real estate broker to manage the process. But depending on the desirability of the property, it can take anywhere from a week to several months to find a suitable buyer, and that uncertainty is often a pain point for sellers.

Opendoor created a much simpler solution. The company will buy practically any home for cash, with a predictable settlement period that is agreed upon in advance. All the seller needs to do is visit Opendoor's website, enter a few details about their home, and decide whether to accept the company's offer -- no marketing, no open houses, and no stressful negotiations required.

After acquiring the house, Opendoor will often perform renovations to increase its value, and then it will try to sell it as quickly as possible for a profit. This business model worked spectacularly well during the last housing boom in 2020 and 2021, because real estate prices were rising consistently. But the tables turned when interest rates soared during 2022 and 2023, because it placed mortgages out of reach for many would-be buyers.

According to Redfin, there are 500,000 more sellers than buyers in the U.S. real estate market right now, which is a record high. Opendoor can have thousands of homes in its inventory at any one time, so it struggles to make money at scale when buyers are calling the shots.

Wall Street is forecasting a sharp decline in third-quarter revenue

Opendoor generated $1.6 billion in revenue during the second quarter of 2025 (ended June 30), which was up 5% year over year. The company sold 4,299 homes during the period, but it only purchased 1,757 more because management is taking a cautious approach to the housing market. In fact, in a series of comments to investors in August, CEO Carrie Wheeler said she doesn't anticipate a recovery any time soon.

Buying fewer homes will have downstream consequences for Opendoor's business, particularly in the form of lower revenue. According to Wall Street's consensus estimate (provided by Yahoo! Finance), the company likely generated just $882 million in revenue during the third quarter, which would be down 36% year over year.

The sharp drop in revenue could also significantly affect Opendoor's bottom line. The company lost $114 million during the first half of 2025, which followed a $392 million net loss for the whole of 2024. Since the company's operating costs are quite modest, it won't be able to cut its way to profitability. The real issue is the razor-thin gross margin it makes on every home it sells, which was around 8.3% in the first six months of the year.

Opendoor had $789 million in cash on hand as of June 30, which should provide enough runway for the next couple of years unless its losses increase materially. Therefore, the company's bottom line warrants close attention when the third-quarter results are released on Nov. 6.

Should you buy Opendoor stock ahead of Nov. 6?

The U.S. Federal Reserve cut interest rates in September for the first time this year, and it's expected to deliver another cut at the end of October. It takes time for the benefits of falling rates to work their way through the economy, but they tend to boost house prices in the long run by increasing consumers' borrowing power, which brings more buyers into the market.

With that said, investors typically avoid shrinking businesses because they destroy shareholder value over time, so Opendoor might lose some support in the short term if its third-quarter revenue really did decline as much as Wall Street expects. But I would also be concerned about the viability of the direct buying business model over the long run. The industry lost two of its biggest players -- Zillow and Redfin -- a few years ago, as the companies deemed it too risky.

Zillow's direct buying business was losing so much money in 2021 that it threatened the stability of the entire company. Simply put, speculating on real estate prices by purchasing thousands of homes can quickly result in billions of dollars in losses when the market turns south.

Therefore, I don't think Opendoor stock is a good buy ahead of Nov. 6, and it probably won't be a buy after that date either. It was trading at a 52-week low of $0.51 just a few months ago for a reason, and the speculative rally engineered by retail investors hasn't solved the company's core issues.

Anthony Di Pizio has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Zillow Group. The Motley Fool has a disclosure policy.