Zillow stock soars 13% on insider buying: Time to jump in?

On June 12, 2024, Zillow Group, Inc. (NASDAQ:Z) experienced a significant surge in its stock price, closing up over 13%. This spike followed the revelation that Jay Hoag, a partner at venture capital firm TCV and a board member of Zillow, had purchased nearly $100 million worth of Zillow shares between June 7 and June 11.

The shares were bought at prices ranging from $42.275 to $43.144, signaling strong confidence from an insider with deep knowledge of the company’s potential and future plans.

Fundamental analysis and business performance

Zillow's financial journey this year has been somewhat tumultuous. In the first quarter of 2024, the company reported revenues of $529 million, a 13% year-over-year increase, which surpassed analysts' expectations by $20 million.

Notably, the Residential segment, which includes premier agent services, saw a 9% increase in revenue to $393 million. The Rentals business exhibited impressive growth, with a 31% year-over-year increase, driven by a 46% rise in multifamily revenue.

The company posted an adjusted EBITDA of $125 million, exceeding the consensus estimate of $104 million. However, Zillow also reported a GAAP net loss of $23 million, which, although slightly improved from the previous year, indicates ongoing profitability challenges.

Future outlook and analysts’ views

Zillow's guidance for the second quarter was less than encouraging, with the company projecting revenues between $525 million and $540 million, which fell short of Wall Street’s consensus of $559.6 million.

Despite the impressive growth in certain segments, Zillow's overall market position and profitability have been under scrutiny. Analysts see potential upside if the company can capitalize on its growing rentals business and integrate its various platforms into a seamless "housing super app."

The rental market, in particular, presents a significant opportunity for Zillow. With only a 1% penetration into a $25 billion total addressable market, there is ample room for growth.

Analysts have mixed views on Zillow's prospects. JPMorgan Chase & Co. recently lowered their target price on the stock from $65 to $61, maintaining an "Overweight" rating, while Wedbush revised their target from $60 to $50, keeping a "Neutral" stance.

As Zillow continues to innovate and expand its market presence, it will be crucial to monitor how these developments reflect in its financial performance and stock price. Now, let's see what the charts have to say about the stock’s price trajectory. This technical analysis will provide a more comprehensive view of whether it’s time to jump in or remain cautious amid the current market conditions.

Bulls take charge, shorts beware

Following its rapid ascent to a high above $200, Zillow’s stock entered into a freefall that took it to below $30. Since October 2022, the stock has largely remained in a $30 to $60 range but has been making higher lows, which is good news for bulls.

Z chart by TradingView
Despite Wednesday’s move, the stock currently remains at the midpoint of the $30-$60 range. Short-term and medium-term indicators have turned bullish. So, investors who are bullish on the stock can buy it at current levels with a stop loss at $41.20. If the bullish momentum continues, the stock can again reach $60 where short-term traders can book profits.

Investors who are bearish on the stock must not try to short it currently as yesterday’s move was accompanied by heavy buying volume. One can attempt shorts only once the stock starts trading below its 100-hour moving average which is currently far off at $41.8.