Opendoor's AI-Driven Turnaround Hype Masks Persistent Profitability Woes

What happened

A recent Motley Fool article posits that Opendoor is making progress on its turnaround goals through AI-enhanced efficiency and profitability. However, the DeepValue master report reveals that despite operational improvements like reducing aged inventory from 51% to 33% in Q4 2025, core unit economics remain weak with a contribution margin of only ~1.0%. SEC filings indicate declining revenue and gross profit in FY2025, and management forecasts a further revenue drop and EBITDA loss for Q1 2026. With the stock down 86% from prior peaks, it still embeds expectations for a successful 'Opendoor 2.0' recovery not yet supported by financial data. Thus, the narrative of a corner turned is premature, hinging on unproven future execution in a challenging macro environment.

Implication

The article's surface-level praise ignores deeper issues like reliance on non-recurring inventory liquidation for cash flow, which reversed in recent filings. Opendoor's business model requires continuous access to external funding, making it vulnerable to capital market shifts and dilution risks from convertible notes. Critical metrics to monitor include contribution margin surpassing 1% and aged inventory staying below 30% in upcoming quarters, as per the DeepValue report's triggers. Macroeconomic headwinds, such as weak existing-home sales and skewed mortgage demand toward refis, could impede the needed transaction volume recovery. Therefore, adhering to the WAIT rating, a prudent strategy is to seek entry only after validating operational milestones in the next 3-6 months, avoiding premature bets on unproven AI claims.

Thesis delta

The news article does not materially shift the investment thesis; the core view remains that Opendoor must demonstrate durable unit economics through improved contribution margins and controlled inventory aging before any bullish stance is warranted. Specifically, the thesis stays unchanged: wait for Q1-Q2 2026 evidence, as highlighted in the DeepValue report, to confirm or deny the turnaround narrative, with no shift from the current WAIT rating.