What Happened?
Shares of online real estate marketplace Zillow (NASDAQ:ZG) fell 14.9% in the morning session after the company reported disappointing fourth-quarter quarterly results as it provided quarterly guidance for sales and EBITDA below Wall Street's expectations.
Management anticipates a challenging housing market in the first quarter of the year (2025) as investors continue to wait for a recovery. Notably, the outlook assumes industry growth will stay flat. On the other hand, Zillow beat analysts' revenue and EBITDA expectations this quarter. However, the weak outlook is weighing on shares and keeping investors cautious. Overall, this quarter could have been better.
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What The Market Is Telling Us
Zillow’s shares are quite volatile and have had 18 moves greater than 5% over the last year. But moves this big are rare even for Zillow and indicate this news significantly impacted the market’s perception of the business.
The biggest move we wrote about over the last year was 3 months ago when the stock gained 25.2% on the news that the company reported strong third-quarter earnings that exceeded analysts' revenue, EBITDA, and EPS expectations. However, Q4 guidance was mixed, with revenue in line while EBITDA came in below.
Regardless, the results were encouraging amid a challenging operating environment as elevated rates have impacted the purchasing power of home buyers, leading to lower transaction volumes. However, for Zillow, the situation is more encouraging as technical updates to user experience and the introduction of new features drove user engagement on its platform. As a plus, the company is also diversifying income sources from its traditional real estate listings by offering services such as mortgage lending and rental platforms.
Zooming out, we think this was a solid quarter, and the market seems to be focusing on the quarterly beats.
Zillow is up 8.6% since the beginning of the year, but at $76.08 per share, it is still trading 10.8% below its 52-week high of $85.29 from February 2025. Investors who bought $1,000 worth of Zillow’s shares 5 years ago would now be looking at an investment worth $1,503.
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