3 months, 16 times! "The hottest meme stock in America" is a "house flipping company"

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A real estate technology company, Opendoor, which has incurred losses every year since its founding, sparked a capital frenzy in 2025.

Within just three months, its stock price soared from below $1 to $8.11—a nearly 16-fold increase. Its market value surged to $6 billion, making it one of the most actively traded stocks in the US market for a time.

The orchestrators of this frenzy are a group of retail investors calling themselves the “Open Army.” They crowned Opendoor as the new "meme stock," and even managed to pressure the management—pushing the CEO to resign in August, bringing back two co-founders onto the board, and appointingShopifyCOOKaz Nejatianas CEO.

However, regardless of the commotion in the capital market, a fundamental problem remains: Opendoor's core business—iBuying (instant home buying, renovation, and resale)—seems fundamentally unscalable.

The “iBuyer” Model: A Difficult Business to Scale

iBuying refers to using algorithms to quickly purchase real estate, then lightly renovate and rapidly resell it.

However, this model is contrary to businesses that can scale well. In a scalable business, revenue grows much faster than costs, but buying and selling houses is a capital- and labor-intensive industry. Opendoor operates in about 50 markets, and each location has profoundly different licensing, inspections, labor, and materials supply situations. There is no standardized system that can work everywhere.

This business is at odds with the logic of scalable internet companies. For successful scale, revenue growth should far exceed costs, but real estate trading is a typical capital- and labor-intensive industry. Opendoor operates in about 50 markets, and every market faces drastic differences in permits, inspections, labor, and material supply—making standardized expansion nearly impossible.

The painful failure of industry giant Zillow serves as a cautionary tale. In 2021, Zillow’s home price prediction algorithm suffered disastrous errors, causing its iBuyer business "Zillow Offers" to buy at excessive prices, ultimately leading to loss-making sales.

Even during good market years, Zillow Offers’ gross margin was extremely thin, with profits completely eaten up by high operating expenses. Before the business was finally shut down in 2021, Zillow had already suspended purchases due to backlogs in renovation and operational bottlenecks.

In the US, a lengthy home holding period means even higher maintenance and property tax costs, further eroding already slim profits. Ultimately, the business proved unsustainable in the face of price volatility.

“Financial Report Magic”: Losses Hidden by “Contribution Profit”

Opendoor’s financial story is strikingly similar to Zillow’s.

In the first half of 2025, Opendoor’s financial report showed revenue of $2.7 billion and gross profit of $227 million. The company specifically highlighted a non-standard financial metric—recording $123 million in "contribution profit."

But this is merely “financial report magic.” Beneath this seemingly impressive report card lies a real pre-tax loss of $114 million.

Opendoor calculates "contribution profit" by excluding most operating expenses, as well as the interest incurred from its $2.2 billion in debt.

This type of financial reporting is very similar to what Zillow did. In 2019, Zillow’s home reno business showed a non-standard metric called “post-interest home sale returns” in its financial report, which showed an average loss of about $5,000 per property. But when all operating costs are included, the true pre-tax loss reached as much as $72,000 per property on average.

Now, retail investors hope Opendoor will shift to a lighter platform model—connecting buyers, sellers, and agents to collect fees. But this is not a new idea; the market is already crowded with competitors, and Opendoor itself launched similar services as early as 2022.

Ultimately, real estate is a mature, cyclical industry with many players. Even if Opendoor somehow discovers the secret to profitability for iBuying, the extremely low barriers to entry ensure competitors can copy it quickly.

For Opendoor, its most valuable asset at this moment might be this very wave of speculation. The most rational business decision may be to imitate other meme stocks like GameStop and take the opportunity to issue new shares—raising precious capital and time for the company to explore transformation. Because when the hype fades, what tests a company in the end will always be its ability to sustain itself.

Risk Warning and DisclaimerThe market has risks, and investments should be made cautiously. This article does not constitute personal investment advice and does not consider individual users' specific investment objectives, financial situations, or needs. Users should determine whether any opinions, viewpoints, or conclusions in this article suit their circumstances. Investment is at your own risk. ```