Zillow Group (ZG) shares surged in pre-market trading after the online real estate platform posted stronger-than-expected fourth quarter revenues and said it would wind-down its home flipping business earlier than forecast.
Zillow generated revenues of $3.88 billion over the three months ending in December, a near four-fold increase from the same period last year and well ahead of Street forecasts. The group also posted and adjusted loss of $400,00 for the quarter and a modest $195 million gain for the full fiscal year.
Zillow said it would quicken the wind-down of its Zillow Offers business, which purchases homes directly through its site for near-term resale, following a $405 million write-down to its existing inventory of homes over the past two quarters.
"We are selling homes faster than we anticipated at better pricing levels than we projected (and) have now sold or entered into agreements to sell or dispose of more than 85% of our inventory," CEO Rich Barton told investors on a conference call late Thursday. "The wind-down process is running smoothly, efficiently, and we expect it to generate positive cash flow."
"We felt confident in November and we feel even more confident today that exiting iBuying and eliminating housing market balance sheet risk to our company and our shareholders was a great decision while giving full respect to the affected employees," he added.
Zillow shares were marked 12.3% higher in early Friday trading to change hands at $53.78 each, a move that would still leave the stock nursing a 46.4% six-month slump.
Looking into the coming year, Zillow said it wants to launch what it calls a 'super app' for the housing market that integrates the house-hunting, purchase and mortgage markets. Barton said the venture could generate around $5 billion in revenues between now and 2025, with a estimated profit margin of around 45%.
"With leading traffic and brand awareness, Zillow attracted ~2/3 of home buyers to its website and apps in 2021 with ~25% connecting with Zillow to look for a Premier Agent," said JMP Securities analyst Andrew Boone, who carries a 'market perform' rating on Zillow stock.
"This highlights Zillow's tremendous position in the homebuying ecosystem and its massive opportunity to improve its funnel and grow revenue as it has just ~5% of buy side transactions today," he added. "However, Premier Agent growth has slowed recently and we look for additional confirmation before matching Zillow’s long-term targets."
