Opendoor Technologies (NASDAQ:OPEN) is going to have passionate advocates. The company will also have individuals who will never use the technology. But like many things in society, that leaves a wide group of individuals in the middle. And it’s that group that will decide the outlook for OPEN stock.

Opendoor’s revenue exceeded analysts’ estimates by 17%. But that is not reflected in the stock’s performance. In the last 12 months, OPEN is down 60% and the stock is down 39% in 2022 alone. 

Now that OPEN stock is trading below $10, it’s starting to feel like it may be a buying opportunity. However, as I wrote in early 2021, I have my concerns about the company’s growth projections.

What is the Addressable Audience? 

I had concerns about Opendoor’s addressable market. On page 32 of the company’s investor deck, it projects that it can have a gross merchandise value of $1.3 trillion. That’s based on the company expanding to all 50 states and that 87% of the homes will be in its “buy box” of $100K to $750K.

That’s a hefty increase from the $8 billion in revenue that the company recorded for the full year 2021. However, I believe that addressable market may be an issue. In the frequently asked questions section of the company’s website, it specifies that it will “only buy homes if the seller has clear ownership of the property.”  

But as I pointed out over a year ago, that means no mortgage payments. And in a 2017 study by Zillow (NASDAQ:Z), only 15.9% of the prized millennial audience own homes and have no mortgages.  

The Company is Highly Leveraged

I’ll refer you to an article written by InvestorPlace contributor Mark Hake who points out that Opendoor is highly leveraged. This is a strategy that can work successfully in a bullish market. However, with high inflation and interest rates (including mortgage rates) rising, it’s fair to believe that real estate activity will slow down.  

Simply put, the bidding war that was on for some homes during the pandemic may be coming to an end. And in this game of musical chairs, it may be a company like Opendoor that’s still standing.  

The Pandemic Boom May Be Over 

Another fact that Opendoor highlights in their presentation is that Covid-19 accelerated a shift in consumer behavior. There’s no denying that. However, it’s reasonable to question if the acceleration is now slowing down. For example, on page 36 of the company’s investor presentation, the company points out that “de-urbanization is occurring as buyers avoid dense areas.”  

But as early as September 2020 Bloomberg was reporting that the urban exodus may be overstated. And even when individuals are deciding to leave one city many are just moving to another city. Plus, as Josh Enomoto points out, some of the enthusiasm for OPEN stock comes from the idea that individuals can work from anywhere. But what happens if that trend is overstated?  

How Wide is the Company’s Moat? 

It would be one thing to say that Opendoor has a first-mover advantage. However, the company already has competition from Zillow as well as other smaller companies. And while Opendoor is growing quickly, I’ll refer back to Hake’s article to note that the company has done so by becoming largely a home buyer and not so much a seller.

Is OPEN Stock a Buy?  

Opendoor is not yet profitable, however the company’s price/book ratio suggests that OPEN stock may be fairly valued. In addition, the stock may be showing a support level. And the consensus price target of analysts suggests the stock still may have higher to rise.  

But I’d take that with a grain of salt. As I look deeper at analyst projections, the consensus is being held up by a couple of analysts that have made bullish calls over a year ago. It’s fair to say that OPEN stock may not have as much juice as investors imagine. 

I do believe there’s a niche audience that will appreciate the iBuying model. Those voices will be passionate. But they also reflect a small subset of the addressable market. It’s not about a company being too good to be true, it’s just not a model that works for every buyer.  

On the date of publication, Chris Markoch did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.