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When looking at other industries, a lot of time quarter-over-quarter results are looked at due to seasonality. But in the case of Zillow (NASDAQ:Z) a disappointing fact should be noted when looking ahead at the Q2 results. According to this article from Trulia.com, another leading online real estate website, the busy season for housing is in Q1. Zillow did very well against Q1 in 2012, but had low growth against Q4 of 2012, the slowest quarter of the year for housing. Here is a look at the numbers:

(click to enlarge)

The quarterly reports shows impressive stats over last year's Q1 and I have color coded those % changes that are impressive in green. But as mentioned above, the seasonality should have made for a lot stronger of a quarter going from historically the weakest real estate quarter (Q4) to the strongest (Q1). So comparing Q4 of 2012 to Q1 of 2013 there are a lot of unimpressive stats. They are unimpressive (even though they are positive growth, besides monthly rate of subs) because currently Zillow is priced as a "growth" stock and delivering 10-20% growth is what established companies do. These established companies also have P/E ratios that are reasonable compared to their counterparts, usually P/Es of 10-30 in the Dow Jones components. But Zillow is currently at a P/E ratio of 6,915. So when Zillow grows unique user stats by 35%, but only grows subscriptions by 15% and total revenue by 13%, those are very disappointing stats to me when looking at a "growth company."

When entering into Q2 earnings, investors should take a look at this hiccup seriously. This might be a reason why Zillow management raised marketing spend to historic highs, to get more traffic and more interest as its growth over Q4 was not that impressive. It is also experiencing a lot more competition from Trulia (NYSE:TRLA), Move, Inc. (NASDAQ:MOVE) and its rental market is seeing a lot of competition from start-ups like Zumper.com. Another area of concern is all of the insider selling outlined in this SeekingAlpha.com article. Lastly, this Forbes.com news bulletin says Citigroup initiated coverage of Zillow and pegged it as "Neutral." This is quite disappointing to Zillow bulls as it is saying to its investors that this is not a stock it is excited about right now and think it will perform in the general trend of the market, until further guidance. So investors should be cautious when looking at quarter-over-quarter results in an industry where seasonality should favor Q1 versus Q4 and especially when the company's stock price is currently valued on huge growth potential. The amount of new competition in this market and existing competition that is all vying for ad spend should warn investors that this space might be getting too crowded and high growth might be very hard to come by.

Source: Prepare For Q2 Results By Analyzing Zillow's Disappointing Q1 Results, Showing Shrinking Growth