Zillow forecasts first $ 2 billion quarter and blows revenue expectations
Zillow Group Inc. forecasts significant growth in its new home flipping business and the first $ 2 billion quarter of sales on Thursday, but the cost of that effort seems to reduce profits and hurt stocks.
The second of $ 9.6 million (4 cents per share) with $ 1.31 billion in revenue from $ 768 million in sales in the same period last year when the COVID-19 pandemic caused financial turmoil in many companies. Reported quarterly earnings. Zillow reported revenue of 44 cents per share after recording an adjusted loss of 17 cents per share last year after adjusting for stock-based compensation and other costs.
According to FactSet, analysts expect an average adjusted return of 24 cents per share for $ 1.28 billion in sales. In after-hours trading immediately after the results were announced, the stock price fell by 5%, but rebounded and rose by 2.4% to end the extended session. Zillow ended the day’s regular session at $ 110.30, down 0.1%.
Zillow provides consumers with a website with real estate information and offers paid programs for real estate professionals embedded in the company’s internet, media & technology, or IMT segments. Zillow reported revenue from the IMT segment from $ 280 million a year ago to $ 476.1 million and revenue from core professional agent products from $ 192 million to $ 348.8 million. Analysts expect an average of $ 467 million in IMT revenue and $ 345 million in Premier Agent revenue, according to FactSet.
“The US housing market continued to perform well throughout the second quarter, thanks to the combination of increased flexibility in working from home, relatively low interest rates, and a quarter of housing supply restrictions. It may have contributed to the continued strength of Zillow’s core premier agent business, “Canaccord Genuity analyst wrote in a preview of this week’s results.
Zillow has also recently launched a business called the Zillow Offer, which offers home buying and selling and mortgage services. Sales in the housing segment, including Zillow offers and related businesses, increased from $ 454.3 million in the year-ago quarter to $ 777.1 million, and sales in the mortgage segment increased from $ 33.8 million to $ 56.7 million. .. According to FactSet, analysts’ average expected home revenue is $ 715 million and mortgage revenue is $ 62 million.
According to FactSet, Zillow executives expect to generate between $ 1.93 billion and $ 2.05 billion in the third quarter, smashing analysts’ average estimates of $ 1.45 billion. The forecast is that the housing segment will require $ 1.4 billion to $ 1.5 billion, the IMT segment will require $ 472 million to $ 485 million, and the mortgage will require $ 55 million to $ 62 million.
The biggest difference between analysts’ estimates and Zillow’s forecasts is that Zillow offers are expected to grow significantly. Analysts predicted revenue of about $ 900 million in the housing segment, but Zillow goes far beyond that.
When executives discussed the guidance in a letter to shareholders released Thursday afternoon, “This guidance is intended to step up and scale purchasing activities as a result of progress in strengthening the pricing model. It reflects the acceleration of investment. ” “Automation at the top of the goal-achieving process helps drive future scalability and enhance the customer experience.”
However, the spending needed for that growth can reduce potential profits. Zillow forecasts adjusted Ebitda for the third quarter from $ 94 million to $ 126 million. This will be significantly lower than the $ 183 million reported in the second quarter.
“We expect integrated adjustment EBITDA to be lower than in the second quarter to accelerate overall employee investment, technology and development efforts, and sales and marketing costs,” executives wrote in a letter.
Executives are expected to host a conference call at 5 pm Eastern Standard Time to further discuss the outcome.
“Investors are up to date on Zillow’s efforts to increase the number of home services it offers and how they are working on new features that will allow homeowners to use Zestimate as a live cash offer at home. We are looking for the latest information, “says Canaccord Genuity. Analysts wrote while maintaining a stock buy valuation and a $ 220 price target.
Zillow’s share price soared to a high of over $ 200 per share in February, but quickly cooled.So far this year, equities have fallen 18.8% overall, but the S & P 500 Index is
In the meantime, it increased by 17.2%.