Zillow stock price forecast: buy the dip or sell the rip?

on Nov 3, 2021
  • The Zillow stock price crashed after disappointing earnings.
  • The company’s revenue missed the consensus estimates by more than $200 million.
  • The stock’s path of the least resistance is to the downside.

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The Zillow (NYSE: Z) stock price is under intense pressure after the company delivered a relatively weak quarterly result. The stock slipped by as much as 18% in the morning session. It is trading at $71.90, which is the lowest it has been since August 6. Also, this price is about 66% below its highest level this year.

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Zillow earnings review

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Zillow is the biggest property portal in the United States. In addition to its eponymous brand, the company also owns Trulia and Streeteasy. The company makes most of its money through the adverts it sells in its platform.

While the ad business is doing well, the company’s business has struggled recently because of its iBuying feature. This is a home-flipping business, where the company used its algorithms to buy homes and then sell them at a profit. 

The biggest challenge is that Zillow bought thousands of homes that are currently priced lower than where it bought them. As a result, the company announced that it will end the business and lay-off about two-thirds of its employees. In a statement, the company’s CEO said:

“Put simply, our observed error rate has been far more volatile than we ever expected possible and makes us look far more like a leveraged housing trader than the market maker we set out to be. “

Zillow’s Premier Agent revenue rose by 20% year-on-year while its IMT segment revenue rose by 16% to $480 million. Its total revenue was more than $1.7 billion, which was lower than estimates by about $270 million. It expects that its revenue for the fourth quarter will be about $2.4 billion while its EBTDA will be a loss of about $136 million. 

The Zillow stock price also declined sharply because of analysts downgrades. In a statement, analysts at BTIG downgraded the stock from buy to neutral. Analysts at Deutsche Bank also recently lowered their target for the stock from $225 to $185. 

Zillow stock price forecast

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Zillow Stock Price

The Zillow stock price has been in a bearish trend in the past few months. The decline accelerated today after the company delivered relatively weak results. Along the way, the stock declined below the lower trendline that is shown in black. 

The Z stock has also moved below the 25-day and 50-day moving averages while the MACD has been under intense pressure. Therefore, for now, the path of the least resistance is to the downside, with the next key level being at $50. 

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