The average mortgage rate for a new home was 3% in 2020, according to the National Association of Realtors.
Thanks to inflation and the Federal Reserve’s interest rate hikes, that average has doubled to 6% today, the highest we’ve seen since 2008!
Higher interest rates cost millions of Americans the opportunity to buy a new home.
This trend has hit one company hard.
But with our Stock Power Ratings system, you would have known that Opendoor Technologies Inc. (Nasdaq: OPEN) was one to steer clear of even before it announced it sold 42% of its properties at a loss in August.
A quick look at our Stock Power Ratings system helps you see the real picture of a company.
Opendoor started in 2013 as an online platform for buying, selling and trading residential properties.
Homeowners can post their homes, record video walk-throughs and get offers on their homes.
Prospective buyers can use the app to search, make offers and buy their new homes.
OPEN stock scores a “High-Risk” 1 out of 100 on our Stock Power Ratings system, and we expect it to underperform the broader market over the next 12 months.
OPEN Stock: Significant Downside + Low Quality
I like to tell you about impressive company milestones.
Not so much for OPEN:
- In its most recent quarter, the company reported a net loss of $54 million!
- Its total gross margin for the quarter was negative 4.4%.
That’s why OPEN scores a 13 on growth.
It also scores in the red on our other five metrics.
OPEN has a negative price-to-earnings ratio, meaning it’s not making money. It scores a 33 on value.
The company has an awful return on equity of negative 11.5% and a return on assets of negative 3.7%, which translates to an 11 on quality.
Folks are paying too much for the stock, and it has a ways to go before turning a profit.
From its 52-week high in November 2021 to its low set this week, the stock has dropped 83.7%.
Opendoor stock scores an atrocious 1 overall on our proprietary Stock Power Ratings system.
That means we consider it “High-Risk” and expect it to underperform the broader market.
Bottom line: The housing market has cooled due to higher interest rates, with more Americans priced out of buying a new home.
And that makes OPEN a stock to avoid.
Stay Tuned: Canadian Oil Co. Outperforms Surging Energy Market
On Monday, we return to our original Stock Power Daily format.
Stay tuned — I’ll share all the details on another oil and gas company, this time with “maximum momentum.”
Matt Clark, CMSA®
Research Analyst, Money & Markets
P.S. I’d love to hear your thoughts about my “Stock to Avoid” article today. Was it valuable? Would you like us to continue sharing occasional “High-Risk” stocks so you know what to stay away from?
Would you prefer we only share “Bullish” and “Strong Bullish” stocks?