Categories Analysis, Consumer

Zillow Stock: After downsizing, what lies ahead for the real estate marketplace

The company recently discontinued its iBuying business Zillow Offer, which had been a drag on profitability for quite some time

The performance of Zillow Group Inc. (NASDAQ: Z, ZG), a leading online real estate marketplace, was rather disappointing this year despite the thriving housing market that remained mostly unaffected by the pandemic-related challenges. Currently, the company is on a drive to streamline operations through various initiatives such as rightsizing the business and boosting productivity. 

Last week, the stock got a boost after Zillow announced a $750 million stock repurchase program, recovering from the downturn triggered by the closure of the iBuyer segment in November. Then, the stock had slipped to the lowest level in more than one-and-half years. The good news is that the buyback would translate into higher shareholder returns in the long run.

Outlook

The uptrend is expected to continue in the coming weeks, and analysts believe the stock is on its way to breaching the $100-mark by next year. However, there is uncertainty over the near-term performance, since the effects of the reorganization and revised CapEx program are yet to reflect on the value. Zillow is definitely a promising long-term investment that deserves to be on investors’ watch list.


Read management/analysts’ comments on quarterly reports


In November, the company discontinued its iBuying business Zillow Offer, which had been a drag on profitability for quite some time. The management cited the risk of high earnings and balance-sheet volatility as the reason for the wind-down, while the related impairment and restructuring charges are expected to have a negative impact on the company’s finances this year and in 2022.

Mixed Q3 Outcome

For the third quarter of 2021, Zillow reported total revenues of $1.74 billion, which is significantly higher than last year’s $656.7 million. But the company slipped to a net loss of $328.2 million during the three-month period from a net profit of $39.6 million a year earlier. The results fell short of expectations. Zillow executives expect the bottom-line to remain in the negative territory in the fourth quarter.

“As we look forward, my priorities remain focused on innovating and executing on behalf of our customers and partners, and I look to ensure an orderly wind-down of Zillow Offers operations, right-size our cost structure, and improve productivity to drive a profitable, scalable, and positive cash flow company, drive prioritization to invest in sustainable topline growth opportunities across the company, including new integrated services that are more scalable, less subject to earnings volatility, and more capital efficient,” said Allen Parker, the chief financial officer of the company.

At the Bourses

Zillow’s stock has been on a losing streak for a long time, with the value more than halving since the beginning of 2021. It suffered one of the biggest falls soon after the not-so-impressive third-quarter earnings report. The shares traded slightly higher on Friday morning, after closing the previous session lower.

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