Company Reports

Zillow’s strategy centers on turning its dominant residential search platform into an integrated transaction ecosystem, seeking to capture increasing value across the homebuying and rental processes. It monetizes mainly via advertising and agent leads and has recently expanded into both mortgages and transaction services. Over the medium term, we expect Zillow to prioritize residential-mortgage integration, broader adoption of agent partnerships, and better monetization of engagement, supporting operating leverage as transactions recover, though competition from Redfin, Homes.com, and other brokerages remains fierce. We see a credible path to growth beyond transaction volumes, but limited customer-relationship control constrains its ability to capture agents’ lifetime earnings.

We're initiating research coverage on Zillow Group, a leading online US real estate marketplace.

We are dropping coverage of Zillow Group. We provide broad coverage of more than 1,500 companies globally and periodically adjust our coverage according to investor interest and staffing.

Zillow Group reported strong first-quarter results that exceeded the upper end of its quarterly guidance. The company reported net income of $52 million on $1.2 billion of revenue, with revenue increasing 8% from a year ago and 54% sequentially. The company reported total revenue of $1.218 billion compared with the upper end of its guidance range at $1.112 billion and total adjusted EBITDA of $181 million compared with the upper end of its guidance range at $138 million. All three of the company’s segments exceeded their guidance. Zillow’s homes segment benefited from the strong appreciation of the homes that it bought and was the primary driver of the sequential revenue growth. The Internet, media, and technology segment continued to benefit from high site traffic, while the mortgage segment benefited from the continued high interest in mortgage refinancing. We don’t anticipate making a significant change to our $42 fair value estimate for no-moat Zillow.

Zillow Group is building a one-stop shop to serve consumers along each step of the homebuying process. Early on, the company focused on expanding its audience on Zillow.com, allowing it to overtake rival Realtor.com in the race to achieve pre-eminence as the largest real estate network on the web. In 2014, Zillow acquired Trulia.com, meaning it now possesses the most visited and third most visited real estate websites by traffic. In this regard, the company’s success can be attributed to its aggressive approach at building a recognizable brand to attract consumers and consequently the agents seeking their business.

Zillow Group reported impressive fourth-quarter results, with the firm benefiting from the countercyclical effect of a buoyant housing market amid the coronavirus-induced economic recession. For the fourth quarter, the firm reported total revenue of around $789 million, a 16% decrease from the fourth quarter of 2019. Full-year 2020 revenue came in at $3.3 billion, a 22% increase from 2019. Companywide adjusted EBITDA showed improvement in the positive environment, coming in at $170 million for the quarter, a significant improvement from negative $3 million for the fourth quarter of 2019. Full-year adjusted EBITDA was $343 million, sharply higher from $39 million during 2019. Despite the impressive recent financial results, we are maintaining our $42 fair value estimate for no-moat-rated Zillow Group.

Zillow Group is building a one-stop shop to serve consumers along each step of the homebuying process. Early on, the company focused on expanding its audience on Zillow.com, allowing it to overtake rival Realtor.com in the race to achieve pre-eminence as the largest real estate network on the web. In 2014, Zillow acquired Trulia.com, meaning it now possesses the most visited and third most visited real estate websites by traffic. In this regard, the company’s success can be attributed to its aggressive approach at building a recognizable brand to attract consumers and consequently the agents seeking their business.

Zillow Group reported strong third-quarter results, with the firm benefiting from the unexpected strength of the residential real estate market in the midst of the coronavirus-induced economic downturn. The firm benefited especially from rising revenue in its Internet, media, and technology, or IMT, business that holds its eponymous real estate listings website. During the third quarter, Zillow reported total revenue of around $657 million, a decrease of about 12% compared with $745 million of revenue during the third quarter of 2019. By contrast, companywide third-quarter adjusted EBITDA increased significantly to $152 million, up from around $16 million during the third quarter of 2019. Despite the positive quarterly results, we are maintaining our $40 fair value estimate for no-moat-rated Zillow Group.

Zillow has recently announced its intent to launch an in-house brokerage business in 2021 in a bid to streamline its fledgling iBuying business. This move comes as a surprise, given the firm’s prior insistence that it had no interest in operating as a brokerage, instead emphasizing that it views its "Premier Agents" as business partners. We see the strategic rationale behind this decision and think it further underscores Zillow’s commitment to the iBuying business. However, we maintain our $40 per share fair value estimate for no-moat rated Zillow as the news fails to change our assessment of the firm’s long-term prospects.

No-moat-rated Zillow Group reported better-than-expected results that beat S&P Capital IQ consensus estimates from a top-line perspective. This was buoyed by a strong performance in the housing market in spite of broad economic uncertainty due to the COVID-19 pandemic. Revenue increased 28% year over year, with homes revenue up 82% year over year since the company resumed its home-buying operations. Adjusted EBITDA came in at $15.8 million, far surpassing management expectations of a loss of approximately $60.5 million on a consolidated basis. This measure outperformed expectations on a segment basis as well, as the IMT segment (particularly Premier Agent) delivered stronger results than our and management's expectations. The company purchased 86 homes and sold 1,437 homes over the quarter. However, the purchases are not reflective of commitments made to buy homes later in the year.

Zillow Group is building a one-stop shop to serve consumers along each step of the homebuying process. Early on, the company focused on expanding its audience on Zillow.com, allowing it to overtake rival Realtor.com in the race to achieve pre-eminence as the largest real estate network on the web. In 2014, Zillow acquired Trulia.com, meaning it now possesses the most visited and third most visited real estate websites by traffic. In this regard, the company’s success can be attributed to its aggressive approach at building a recognizable brand to attract consumers and consequently the agents seeking their business.

No-moat-rated Zillow Group reported better-than-expected first-quarter earnings with impressive top-line results despite swirling uncertainty in the real estate market due to the COVID-19 pandemic. Revenue increased 148% year over year, beating S&P Capital IQ consensus estimates. Although adjusted EBITDA declined 79% year over year, this result still surpassed management's expectations, with the Internet, media, and technology segment's EBITDA margin improving 540 basis points. While Zillow had halted iBuying in March in light of the coronavirus crisis and government-mandated stay-at-home orders, management announced its intent to resume home purchases in the upcoming weeks due to encouraging housing market indicators. Accordingly, we are raising our fair value estimate to $35 per share from $33 to account for a slightly improved housing market. We caution that shares currently appear overvalued, with investors reacting far too optimistically to the positive first-quarter results.

Zillow Group is building a one-stop shop to serve consumers along each step of the homebuying process. Early on, the company focused on expanding its audience on Zillow.com, allowing it to overtake rival Realtor.com in the race to achieve pre-eminence as the largest real estate network on the web. In 2014, Zillow acquired Trulia.com, meaning it now possesses the most visited and third most visited real estate websites by traffic. In this regard, the company’s success can be attributed to its aggressive approach at building a recognizable brand to attract consumers and consequently the agents seeking their business.

Zillow and Redfin recently announced that they are completely halting their iBuying businesses as the coronavirus crisis rages on. Although home sales were proceeding nicely prior to the crisis, so called "stay-at-home" orders that have been issued across much of the U.S. threaten to force the housing market to screech to a halt. With citizens limited in their opportunities to exit the house, the open houses so characteristic of the home-buying process have become increasingly rare. After updating our valuation models to incorporate the impact of the coronavirus outbreak, we are decreasing our fair value estimates for no-moat-rated Zillow and Redfin. Our fair value estimate for Zillow decreases to $33 per share from $41, while our fair value estimate for Redfin decreases to $23 per share from $26.

Zillow Group is in the midst of building a one stop shop to serve consumers along each step of the home buying process. Early on, the company focused on growing its audience on Zillow.com, allowing it to overtake rival Realtor.com in the race to achieve preeminence as the largest real estate network on the web. In 2014, Zillow acquired Trulia.com, meaning it now possesses the most visited and third most visited real estate websites by traffic. In this regard, the company’s success can be attributed to its aggressive approach at building a recognizable brand to attract consumers and consequently the agents seeking their business.

We are launching coverage of Zillow Group and Redfin as both companies attempt to reinvent themselves as iBuying platforms. Historically, Zillow built its business through its website, which essentially sold advertising to real estate agents seeking exposure to clients. Meanwhile, Redfin opted for an in-house broker model centered around its proprietary website that was an attempt to drive down costs for the home buying process. Although both business models achieved moderate success, the two companies are now pursuing iBuying, where they will purchase and sell homes directly from consumers. Although we expect this shift to result in significant growth, we are wary of the added risk it represents. Our fair value estimate for Zillow is $41 per share while our fair value estimate for Redfin is $26 per share. We do not think either company possesses a competitive advantage and assign a no-moat rating to both.

Zillow Group is in the midst of building a one stop shop to serve consumers along each step of the home buying process. Early on, the company focused on growing its audience on Zillow.com, allowing it to overtake rival Realtor.com in the race to achieve preeminence as the largest real estate network on the web. In 2014, Zillow acquired Trulia.com, meaning it now possesses the most visited and third most visited real estate websites by traffic. In this regard, the company’s success can be attributed to its aggressive approach at building a recognizable brand to attract consumers and consequently the agents seeking their business.

We are dropping analyst coverage of Zillow. We provide broad coverage of nearly 1,500 companies across more than 90 industry groups and adjust our coverage as necessary based on client demand and investor interest.

Zillow and Trulia rapidly disrupted the $8 billion U.S. real estate agent advertising market with consumer-focused innovation. Together, they command about 30% of real estate traffic on desktop computers and more on mobile devices. At the same time, the companies intensely fought each other to win the category outright, with neither gaining a commanding lead. The fight for consumers' attention led to elevated spending, and a strong direct rivalry that limited the pace at which real estate agent advertising could be monetized.

Narrow-moat Zillow reported positive third-quarter results reflecting continued success in penetrating the $10 billion online real estate advertising market. Revenue from continuing operations increased 18% from the year-ago period to $167 million, and adjusted EBITDA advanced 51% to $30 million. Diluted GAAP earnings per share amounted to a loss of $0.15, compared with a loss of $0.13 in the year-ago quarter. Initial 2016 guidance calls for accelerating revenue growth but flattish adjusted EBITDA margins as Zillow focuses more on top-line growth than margin expansion. We are maintaining our $33 per share fair value estimate, as the company appears to have ample runway in gaining share of the real estate advertising market.