Shares of Opendoor Technologies (NASDAQ: OPEN) soared higher in the first month of 2023, according to data from S&P Global Market Intelligence. The online home flipper and iBuyer saw its shares bounce last month after data came out about a potential recovery in the U.S. housing market. The stock was undoubtedly helped by broad price appreciation in growth stocks last month as well. As of this writing, shares of Opendoor are up 135% year to date (YTD) but down 73% in the last 12 months.

Opendoor is in the business of buying and selling homes in a process known as iBuying. ThAT simply means a real estate platform like Opendoor directly buys a home from someone and then sells it to someone else, with the hope of earning a profit in the process. This method of operation differs from other internet platforms like Zillow that mainly facilitate real estate transactions on their marketplaces.

Buying and flipping homes can be a great business when home prices are soaring, as they were in 2020 and 2021. But in 2022 the home market stalled out with mortgage rates rising at the fastest pace in recorded history. New homebuyers were priced out, with homes becoming unaffordable at previous listing prices, while many sellers didn't want to list their units at 20%-30% price cuts. Price cuts hit Opendoor hard, as the company makes money only if it can sell its real estate inventory at a higher price than what it bought it at. Last quarter, Opendoor's gross profit was a shocking negative-$425 million because of declining sales prices, even though revenue was up 48% year over year to $3.4 billion.

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Source Fool.com