Picture supply: Getty Pictures
The Nasdaq‘s hosted its fair proportion of millionaire-making shares over the previous couple of a long time. From Netflix and Tesla to Nvidia, the proper inventory choose can ship returns which can be nothing wanting extraordinary.
One Nasdaq inventory that’s now being talked up as having 100-bagger potential is Opendoor Applied sciences (NASDAQ: OPEN). It has been doing the rounds on Reddit’s WallStreetBets web page, the place retail merchants collect to debate meme shares and different high-risk buying and selling methods.
This latest consideration has seen the Opendoor share value surge 349% in only one month. Merchants are evaluating the inventory to Carvana (NYSE: CVNA), the net used automotive retailer whose shares have exploded by practically 7,200% for the reason that begin of 2023.
Which means anybody who invested $14,000 again then is sitting on $1m at present.
Similarities
To be truthful, I do see a few similarities. Opendoor buys and resells properties, whereas Carvana buys and resells used vehicles. Each function in capital-intensive industries and have relied on debt to fund development.
Again in 2022-23, when rates of interest soared, the price of carrying that debt ballooned and each discovered themselves in hassle. Their survival was doubtful (Carvana got here near chapter).
But, whereas Carvana has carried out a Lazarus-like resurrection from its 98% inventory plunge between 2021 and 2022, Opendoor stays 93% beneath its all-time excessive. Subsequently, it has the potential to do a Carvana, in line with the meme inventory merchants.
Operating the numbers
Wanting on the numbers although, that’s the place the similarities finish for me. Carvana reported $13.7bn in income in 2024, which was 27% greater than the 12 months earlier than. Crucially, it generated a revenue, and earnings per share are forecast to rise 60% this 12 months and 24% in 2026.
Against this, Opendoor has by no means turned a revenue. Income slumped practically 26% final 12 months to $5.2bn, and is anticipated to say no one other 5% this 12 months. And whereas Wall Road expects strong income development after that, income stay absent so far as the attention can see.
The enterprise mannequin of flipping homes in America hasn’t been confirmed to work profitably but, a minimum of for Opendoor. This makes the inventory very dangerous (and why it was buying and selling for lower than $1 simply final month).
After all, if the agency makes nice strides down the trail to profitability, the inventory may do very well. Conversely, Carvana could battle if a US recession negatively impacts the car-buying market. It’s additionally buying and selling at a premium 42 occasions ahead earnings.
However taking a look at each shares as a long-term investor, I a lot choose Carvana. It’s a minimum of worthwhile and is rising at a quicker charge than Opendoor.
The web automotive retailer additionally nonetheless has its founder-CEO in cost, which I wish to see, whereas Opendoor’s founder left the agency in 2024.
Last ideas
After all, I settle for it’s completely doable that Opendoor rockets a lot greater within the close to time period. Meme-stock rallies can defy logic and make merchants some huge cash. Good for them, I say.
However I’m writing from the place of a long-term investor (with a horizon of 5 to 10 years). And over that interval, I don’t see Opendoor changing into the following millionaire-maker inventory.
I see way more engaging candidates elsewhere for constructing wealth in my very own portfolio.
