The Hedge Fund Manager Who Called Carvana's 100X Move Says This Stock Is the Next 100-Bagger

Key Points

• Hedge fund manager Eric Jackson recently sparked a rally in Opendoor when he called it a 100x candidate.

• Jackson believes the lack of competition and Opendoor's massive data set are big advantages.

• For the time being, Opendoor isn't profitable and should be approached with caution.

• 10 stocks we like better than Opendoor Technologies ›

Shares of real estate iBuyer Opendoor Technologies (NASDAQ: OPEN) have more than tripled in a little over a month, but the rally isn't being fueled by any business results. Instead, hedge fund manager Eric Jackson referred to Opendoor as a 100x stock in a series of social media posts, which also shared an extremely bullish investment thesis.

Jackson doesn't exactly have a flawless investment history -- after all, nobody who actively seeks out 100x candidates does. But he was an early proponent of Carvana, which was essentially priced for imminent demise a few years ago before it generated a 100x rally of its own. Could Opendoor do the same?

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Why could this struggling real estate company be a 100x candidate?

Jackson has posted many times about Opendoor in the past month or so, and there are a lot of components to his investment thesis. His initial post on X detailing why he's so bullish on Opendoor came on July 14, but there have been hundreds of follow-up posts.

Jackson thinks Opendoor's iBuying business could be a big winner when macro headwinds turn around. In a July 16 post, Jackson (correctly) pointed out that there's no major competition left in iBuying. Both Zillow and Redfin shut down their iBuying businesses several years ago, and there's one more (much smaller) publicly traded competitor in Offerpad that remains. During the last real estate bull market, fueled by low interest rates, Opendoor was competing with all of these companies -- in the next one, it won't be.

However, Jackson's thesis isn't just about the iBuying business itself. Instead, Jackson thinks the real value isn't necessarily in buying and selling homes, but in the vast data set Opendoor has accumulated.

As the leader in iBuying, Opendoor has executed over 200,000 real estate transactions, and has not only buy/sell price data, but also tons of other useful information it can analyze. For example, Opendoor has data on how specific repairs translate into price changes. In a nutshell, he believes Opendoor could use this to build the best artificial intelligence (AI)-powered price estimator and prediction tool in the industry, and license it to create a stream of high-margin revenue.

Jackson also thinks assumable mortgages could be a big opportunity for the iBuying side. Conventional mortgage loans generally are not assumable (transferable to a new owner), but several types of government-backed loans, including VA loans, are. With trillions in low-rate, assumable mortgages out there, Jackson sees an opportunity for Opendoor to use these to invigorate its platform.

Should you buy shares of Opendoor right now?

First of all, when Jackson made his 100x call, Opendoor was trading for about $0.82 per share. As I'm writing this, it has already climbed to $2.45, so reaching Jackson's ambitious target would result in a roughly 33-fold gain from here. Of course, I'm sure everyone reading this would be fine with an investment turning $100 into $3,300 in a relatively short time frame, but it's still important to point out that the stock has gained significantly in the month or so since Jackson first shared his thesis.

Second, it's important to mention that this is a highly speculative stock, and Jackson's thesis (on both AI potential and iBuying growth) depends on a lot of things working in Opendoor's favor, and management being able to execute on unlocking the theoretical value of its data. As it stands, Opendoor is not a profitable business, and management is expecting a significant slowdown in the third quarter. High interest rates and an agonizingly slow real estate market are weighing on the business.

Could Opendoor do what Jackson thinks, leveraging its data to develop AI price prediction tools? And could the iBuying business eventually become much larger and consistently profitable? Sure. But there's also a chance that won't happen and the stock could certainly go to zero if market conditions don't cooperate. If you want to make a small investment in Opendoor, it could be an interesting one to watch, but I'd caution against using any money you can't afford to lose.

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Matt Frankel has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Zillow Group. The Motley Fool has a disclosure policy.