So here's a thing that happens sometimes: a company that everyone knows is in a tough business reports earnings that are... less bad than expected. And the stock goes up. A lot. That's what's happening with Opendoor Technologies Inc. (OPEN) on Friday, with shares jumping more than 17% before the market opened.

The iBuying pioneer, which basically tries to automate the process of flipping houses, reported fourth-quarter numbers that managed to clear the admittedly low bar set by Wall Street. Revenue came in at $736 million, which was a whole lot better than the $594 million analysts were looking for. They lost money, but only 7 cents per share on an adjusted basis, versus expectations for a 10-cent loss.

It's the operational details, though, that tell a more interesting story. Opendoor bought 1,706 homes last quarter. That's up 46% from the quarter before. More importantly, they're moving the inventory they have faster. The percentage of homes sitting on the market for more than 120 days dropped from 51% to 33% sequentially. In a business where holding costs can kill you, that's not nothing.

The Turnaround Narrative Takes Shape

CEO Kaz Nejatian was quick to frame this as evidence that the company's new strategy is working. "These results reflect structural improvements in how we operate with more accurate pricing, faster inventory turns, and disciplined selection," he said.

The company made a specific, forward-looking claim that got investors' attention: its cohort of homes acquired in October 2025 is on track to be the most profitable in the company's history. For a company that has burned through a spectacular amount of cash, the promise of actually making money on the homes it buys is kind of the whole point.

The Road Ahead: Less Revenue, But (Maybe) More Profit?

Here's where it gets a bit messy. Looking to the first quarter of 2026, Opendoor expects revenue to drop by about 10% compared to last year. They also anticipate an adjusted EBITDA loss in the "low to mid $30 million" range. Not great.

But management is trying to sell a story of margin improvement, not top-line growth. "Our contribution margin bottomed out in September and has been improving every month since," the company said. "We expect to exit Q1 2026 with the highest contribution margin we've posted since Q2 2024."

In other words: we might sell fewer houses, but we'll make more money on each one we do sell. For a business model that has often been criticized for prioritizing growth over profitability, that's a notable shift in focus.

The Shorts Are Watching

Adding some fuel to the premarket rally is the short interest situation. According to the most recent data, short interest decreased slightly to 118.17 million shares. That still represents 13.83% of the company's float. With an average daily trading volume of about 49 million shares, it would take shorts roughly 2.4 days to cover their positions if they all decided to bail at once.

A big positive earnings surprise is exactly the kind of event that can force that covering, creating a feedback loop that pushes the stock even higher. It's a classic short squeeze setup.

What Comes Next?

The next big test comes with the earnings report due on May 5. The current consensus is for another loss of 9 cents per share, with revenue expected to be around $595 million. That's a steep drop from the $1.15 billion reported in the year-ago quarter, underscoring the company's deliberate pullback in volume.

The analyst community remains skeptical overall, with an average rating of Hold and a price target of $2.59. Recent moves include Citigroup maintaining a Sell rating but raising its target to $1.40 in November, and Keefe, Bruyette & Woods keeping an Underperform rating while lifting its target to $2.00.

For now, though, the market is reacting to the simple fact that things didn't get worse. In a challenging environment for housing and for the iBuying model specifically, showing any sign of operational discipline and margin improvement is enough to get a cheer. Opendoor shares were trading around $5.46 in the premarket, a welcome move for a stock that has seen plenty of pain. The question is whether this is a one-quarter wonder or the start of a real, sustainable path to profitability.