Zillow up 20% on Q4 results: ‘they can have sustainable profitability’

on Feb 10, 2022
  • Zillow Group Inc beats sales estimates for the first time in over a year.
  • Benchmark's Kurnos discussed its Q4 results on CNBC's "Closing Bell".
  • Shares of the company jumped nearly 20% in after-hours trading.

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Shares of Zillow Group Inc (NASDAQ: ZG) shot up 15% in extended trading after the online real-estate marketplace said its revenue hit a record high in the fiscal fourth quarter. On CNBC’s “Closing Bell”, Benchmark’s Daniel Kurnos said:

By the end of 2025, they expect to have $5.0 billion in annual revenue and a 45% EBITDA margin. The iBuyer mess is starting to clean up. They technically missed on a premier agent both in the quarter and outlook, but flashed the 45.5% EBITDA margin into their IMT segment proving they can have sustainable profitability.

Q4 financial performance

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Zillow said it lost $261.2 million in Q4 that translates to $1.03 per share. Adjusted for impairment and restructuring costs worth $720 million and stock compensation, its per-share loss printed at 42 cents versus the year-ago figure of 41 cents in earnings.

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The Seattle-based company generated $3.88 billion in revenue – a YoY growth of a little under 400%. This compares to the FactSet consensus of 90 cents of adjusted per-share loss and $3.01 billion in sales.

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Outlook for fiscal Q1

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For Q1, Zillow now forecasts revenue to fall in the range of $3.12 billion to $3.144 billion on up to $174 million in adjusted EBITDA. In comparison, analysts were at $3.26 billion in revenue and $13 million of loss. Kurnos added:

The housing super app and their limited market share in a huge TAM are driving the stock. The stock’s trading at 10 times cash flow. There aren’t many businesses that can grow double-digit top line with 40% plus margins and still have that kind of a discount to the market. That’s starting to rectify a bit after-hours.

Update on the iBuying business

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The earnings report recharged the stock that’s been in a freefall since late October 2021 when the management said the company’s home-flipping initiative had bought too many houses at exorbitant prices.

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Shareholders, however, were put to somewhat to relief in December when Zillow confirmed it now ad buyers for over 50% of those houses. Proceeds from the sales, it had said late last year, will go to share buybacks. In the earnings press release, the U.S. firm said:

We’ve made significant progress in our efforts to wind down our iBuying business, selling homes faster than we anticipated at better unit economics than we projected. The wind-down process is running smoothly and efficiently, and we expect it to generate positive cash flow.

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