Here's Why Opendoor Shares Rose 22% in March
Shares of Opendoor (NASDAQ: OPEN) climbed 22% last month after an unexpected jump in existing home sales. The real estate tech company has been struggling with a difficult residential real estate market, but the February market data revealed that sales volume grew for the first time in more than a year. The stock also benefited from momentum across the tech sector as investors revised expectations for the Fed's rate-hike timeline.
Opendoor operates an e-commerce platform for residential real estate. Unlike other popular e-commerce platforms that simply connect buyers and sellers, Opendoor actually purchases homes, then sells them. It generates profit on the spread between purchase and sale price.
Unfortunately, economic conditions have made that model difficult. Opendoor's profit margins are narrow, and they have been squeezed harder as home prices fell over the past year. Rising mortgage rates are crushing demand for homes. The company exited 2022 with nearly $4.5 billion in unsold inventory on its balance sheet, which was more than 150% of its fourth-quarter sales volume. Even worse, the company spent more on sales and marketing during the quarter than it generated in gross profit. Things have been rough.
Source Fool.com
