Opendoor's Q4 Progress Masked by Persistent Inventory and Macro Risks

What happened

Opendoor reported a Q4 revenue beat and narrower loss, highlighting incremental progress in its operational overhaul aimed at improving inventory turnover and contribution margins. However, the DeepValue report underscores that this progress is fragile, as past quarters showed sharp margin declines when stale inventory spiked, such as contribution margin dropping from 4.4% in Q2 2025 to 2.2% in Q3 2025. The company's strategy to re-scale acquisitions without accumulating aged inventory remains unproven, with critical metrics like homes listed over 120 days needing to stay low to avoid repeating losses. External risks, including mortgage rates above 6% and mixed housing demand signals, continue to cloud the macro-driven rebound that Opendoor's valuation assumes. Investors should view the Q4 results as a cautious step forward, but the path to breakeven by end-2026 requires sustained improvement in velocity and margins, which are not yet assured.

Implication

The revenue beat and narrower loss suggest Opendoor is managing costs and clearing some legacy inventory, but this is insufficient to alter the investment thesis without consistent KPI recovery. Critical metrics like contribution margin and stale inventory percentage must show sustained improvement over the next quarters to support the stock's pricing of a housing thaw. Without measurable velocity gains, the risk of dilution from equity financing persists, capping upside potential despite narrative-driven optimism. Market sentiment remains tied to macro factors like mortgage rates, making Opendoor a high-beta play vulnerable to housing market fluctuations. Therefore, investors should await clearer evidence from upcoming quarterly reports before committing capital, aligning with the DeepValue report's WAIT rating.

Thesis delta

The Q4 results do not materially shift the investment thesis; they reinforce the necessity of monitoring key operational metrics beyond surface-level improvements. Progress on revenue and loss reduction is positive but overshadowed by persistent inventory aging and macro uncertainties, which could quickly reverse gains. Until contribution margin rebounds above 4% and stale inventory stays low, the thesis remains unchanged, emphasizing a wait-and-see approach to avoid dilution and drawdown risks.