Opendoor’s February Home-Buying Surge Wasn’t Reckless, Eric Jackson Says As Fed Rate Decision Nears

• Eric Jackson said Opendoor’s weekly contracts more than doubled, from 242 to 537 in February.
• He added that acquisitions later averaged 600 weekly in August versus 252 in January. 
• Jackson said cash costs stayed near $110 million, while future profit depends on revenue growth, margins and February home economics. 

Opendoor Technologies Inc. (OPEN) stock is drawing attention as Canadian hedge fund manager and EMJ Capital founder Eric Jackson said the company’s sharp February increase in home purchases reflected improving economics rather than reckless expansion. 

Opendoor Technologies stock inched 0.4% higher in Wednesday’s premarket. The stock has dropped 5% so far this week and is on track for fifth straight week of losses. 

The February Turning Point For Opendoor 

Jackson, known for hit bets on Opendoor and Carvana (CVNA) said in his Substack post that the online home seller’s February increase followed months of work on margins, costs and the balance sheet rather than a sudden decision to chase growth.

The view comes as investors await the Federal Reserve’s latest interest-rate decision, with the company’s margins, cash costs and February acquisition cohort emerging as key tests of its growth strategy. 

“I’m long this stock, and I’ll say up front where I landed. The thing people assume about February is backwards.”

Opendoor signed contracts for 242 homes in the week ended Feb. 7, then jumped to 537 a week later. Purchases remained high at 449 and 442 contracts in the following two weeks. Jackson cautioned that the figures represent contracts, not completed transactions, and are not adjusted for cancellations. 

Jackson said monthly acquisition activity continued to build afterward, reaching an average of 600 contracts a week in August versus 252 in January. February also marked the first month in the period when purchases exceeded the prior year's level.

Opendoor’s Margin Improvements Came First

Jackson’s analysis suggests Opendoor had already improved its business before raising home purchases. In March quarter, revenue reached $720 million and gross margin rose to 10%, the highest since 2022, though the company still lost $159 million from operations. 

Reported operating expenses increased sharply, but most of the increase came from stock-based compensation. Excluding that noncash expense and restructuring costs, quarterly cash operating expenses remained near $110 million even as acquisition activity surged.

Also, Jackson said, Opendoor sold 180.6 million shares and repurchased $264 million of convertible debt for $1.2 billion, creating a $933 million noncash loss that drove most of its $1.1 billion quarterly loss in December last year. 

What Comes Next For Opendoor

“Opendoor doesn’t have a cost problem available to fix. It has a revenue problem, and February is what you do about a revenue problem,” said Jackson. He expects the company’s September and December quarters to show revenue moving toward roughly $1.11 billion, the estimated level needed to cover its cash operating expenses at a roughly 9.7% gross margin. 

The key variables remain gross margin, cash operating expenses and the profit of homes acquired during the February surge. A deterioration in any of those areas would challenge the thesis that Opendoor's rapid expansion was supported by improving unit economics.

“The read that Kaz skipped the unit economics and went shopping doesn’t survive the filings. He finished the margin work, discovered the binding constraint was somewhere else, and went after that instead.”

OPEN Stock: Retail View 

On Stocktwits, retail sentiment around the stock remained in ‘bearish’ territory. 

A user said, “I'm not even sure a surprise rate cut would bring this over $3.”

OPEN stock has crashed 54% year-to-date. 

Also See: TCOM Stock Looks To Reverse 3 Week Losing Streak: Chairman Says China Inbound Travel Remains 'Below Potential'

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