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- Zillow continues to trade in a seasonal pattern with the real estate market.
- Typical seasonal user metrics has the MUUs hitting a trough now followed by a huge sequential rally in January.
- The stock trades at a huge forward PE ratio, but the trend suggests the stock heads higher now.
- At the Ira Sohn conference, Caledona portfolio manager Michael Messara suggested Zillow could be worth $770 per share citing comparisons to online realty websites in the UK and Australia.
- However, there are significant structural differences between the UK/Australian and US markets, notably the absence of buyers' agents and absence of the MLS system.
- Leading UK real estate website Rightmove an indispensable asset to real estate agents in the UK (as evidenced by 90% of agents being paying customers of Rightmove with minimal churn).
- By contrast, less than 10% of agents in the US are paying customers of Zillow. Churn, while undisclosed, is estimated to be high.
- Author estimates that even with a successful integration of Trulia, Zillow has 50+% downside.
- Zillow has fallen substantially from its highs following its announced merger with Trulia.
- The short thesis still holds but there is less margin of safety compared to when the stock was at $140.
- We closed our short position given our price target was achieved.
- Zillow's user growth and engagement is impressive, however this has yet to flow to net income.
- While Zillow recently acquired competitor Trulia, Rupert Murdoch moved to buy out Zillow's last remaining competitor, Move.
- We have major concerns surrounding Zillow's very bearish insider sentiment, especially in the last three months.
- We also have major concerns surrounding Zillow's current and predicted premium valuations, especially in comparison to Move's less premium valuation multiples.
- Due to these concerns, we are bearish on Zillow.
What Insiders Are Saying About Zillow's Stock Price
- Excessive insider selling at Zillow raises red flag.
- Increasingly difficult to support P/S and P/E levels in post QE market.
- Revenue growing 70% annually, but total expense is rising close to 80%.
- Zillow reported September user metrics.
- The stock is more attractive but investors shouldn't rush into it until the bottoming out process runs its course.
- The typical weak sequential user metrics were anticipated to lead these normal seasonal stock declines.
- Potential merger deal between Zillow and Trulia worth $2.9 billion.
- The merger awaits approval from the antitrust enforcers from the Federal Trade Commission.
- Should the deal be approved, Zillow will become the market leader in online real estate marketing.
- The share prices surged in the market after the announcement of the merger, but slid down to their lower levels after the company missed its earnings target in August.
- Analysts issued an average hold rating for the shares.
Zillow-Trulia Moves Back To Its Pre-Deal Valuation As The Excitement Fades
- Zillow has faded as expected after the initial excitement over its acquisition of Trulia.
- Current trading levels are doubly critical given a roundtrip back to a pre-deal valuation and a test of a critical uptrend line, creating a short-term trading opportunity.
- News Corp's acquisition of Move, Inc. may also dampen the market's overall willingness to discount heavily the risks involved in the Zillow-Trulia deal and business.
- News Corp buys competitor Move pressuring the stock of Zillow.
- Zillow's stock remains an avoid until the typical seasonal swoon ends by early December.
- The news contributes to the original thesis that the news cycle after the Summer selling season tends to turn negative.
Zillow: The One Thing That People Are Forgetting
- Zillow is still, in spite of its move downward, incredibly overvalued.
- The bull case is dependent upon a consolidation of the online real estate world.
- The bear case is based on Zillow's extraordinary and entrenched lack of profitability.
- Seasonal trends continue to dictate the price movements of real estate related traffic and stocks.
- Zillow's stock tends to peak in September and reach lows in December.
- Despite the recent drop due to a cooling of the Trulia merger excitement, investors should avoid the stock for now.
Merger Provides No Upside For Zillow At Current Valuation
- Shorting Technology Companies On High Valuations Is Dangerous Because Of M&A Potential, Such As What Happened With Zillow And Trulia.
- The Upside Of Consolidation Appears Priced In At Current Levels With Zillow Offering Limited Upside.
- Zillow Produced A Great Quarter With Strong Top Line Growth.
- Current Valuation And Risk Of Deal Closing Leave Limited Upside.
- The Question Remains Though What If Anything Will Cause Stock To Correct To Reasonable Valuation?
- Even if rich, the acquisition of Trulia by Zillow makes business sense.
- These dotcoms are less similar than they seem.
- Zillow-Trulia will not replace brokers, but is at the forefront of real estate technology.
- It has first-mover advantage in a highly-fragmented, technology-poor industry.
- The road is therefore clear for Zillow-Trulia to grow rapidly.
- Zillow is set to release its second fiscal quarter earnings report of 2014 on Tuesday, August 5th after the market closes.
- Zillow will be acquiring rival Trulia for $3.5 billion.
- Trulia will continue to be operated independently as a separate brand under Zillow's ownership.
- Contributing analysts on Estimize are expecting Zillow's revenue to increase by 62% on a year-over-year basis.
Why Zillow's Current Valuation Isn't Sustainable, Even If Everything Goes Exactly As Planned
- Zillow is significantly overpriced, based on almost every valuation basis. Even if Zillow captures the entire underlying market the valuation makes no sense.
- There are risks associated with the underlying business which are not being properly discounted by the market.
- Zillow's moat is insignificant, and the market is full of competitive products which represent a threat to Zillow.
- Significant insider sales add credibility to the short thesis.
Trulia Shareholders: Congratulations, But You Should Sell Right Now
- There is significant downside risk in Zillow shares, which you now effectively hold.
- A Trulia sale likely signals business challenges.
- Cost reduction is a weak strategic rationale, and the stated target is not impressive.
- The market has reacted enthusiastically to Zillow's potential acquisition of Trulia.
- Lost in the enthusiasm are the significant risks that this acquisition brings.
- With the added share dilution from this acquisition, it will take extraordinary profit growth for Zillow to justify its valuation.
The Zillow-Trulia Merger: Looks Like It's Time To Start Selling Your Shares And Go Short
- The merger between Zillow and Trulia has put sky-high valuations on companies that may not be all that deserving.
- Zillow are Trulia are great companies, but are currently expensive, overpriced and overbought.
- Antitrust laws could put a damper on the proposed merger between the No. 1 and No. 2 real estate website companies.
Tue, Dec. 16, 3:59 PM
- Internet stocks have posted substantial losses after a morning market rally proved short-lived. The Nasdaq is down 1.2%.
- In addition to Google, which has made new 52-week lows, Facebook (FB -3%), Twitter (TWTR -4.7%), Amazon (AMZN -3.5%), and Netflix (NFLX -3.2%) are among the underperforming names. Other decliners: Z -5.5%. TRLA -5.4%. MELI -5.4%. ZNGA -4.9%. ZU -3.2%. ANGI -3.4%.
- The selloff comes even though Goldman upgraded its rating for the sector to Attractive from Neutral today. The firm noted Internet stocks are collectively down 16% over the last 12 months (maybe 18%-19% after today), and that forward EV/EBITDA multiples have contracted significantly.
- Internet/social media ETFs: FDN, PNQI, SOCL
Fri, Dec. 5, 1:40 PM
- Zillow's (NASDAQ:Z) site and apps had 74.3M monthly unique visitors in November, -10% M/M due to seasonality but +41% Y/Y. Y/Y growth was 42% in October, and 41% in Q3.
- Merger partner Trulia (NYSE:TRLA) is naturally following Zillow higher. Last month, Zillow agreed not to close the merger before Feb. 1, to give the FTC more time to review it.
Wed, Nov. 26, 12:58 PM
- Facebook (FB +2.1%) and Twitter (TWTR +2.6%) are rallying on a sleepy pre-Thanksgiving trading day. The companies have respectively seen 21.9M and 16.1M shares traded thus far vs. 3-month averages of 38.3M and 28.1M.
- Several other Internet stocks (both U.S. and Chinese) are also moving higher. Z +2.3%. TRLA +3%. BITA +5.1%. EJ +6.7%. SFUN +2.6%. VIPS +3.3%. SOHU +2.9%.
- Facebook is at its highest levels since selling off in late October due to its Q4 revenue and 2015 spending guidance.
Wed, Nov. 19, 9:40 AM
- Caledonia Funds' Michael Messara has made positive remarks about Zillow (Z +5.5%) at the Sohn Investment Conference, declaring the online real estate leader's shares could reach $770 (!).
- Both Zillow and Trulia (TRLA +5.1%) are getting a lift from the remarks. Each company has already posted big gains over the last few trading days.
Mon, Nov. 17, 1:47 PM
- For the second trading day in a row (previous), Zillow (Z +4.4%) and Trulia (TRLA +3.8%) are rallying.
- Zillow's Monday volume (3.55M shares) is already more than 2x a 3-month average of 1.47M. Trulia's volume (944K shares) is nearly 50% above a 3-month average of 634K.
- No major news regarding the companies has hit the wires. Zillow did recently announce it will shut down its Agentfolio unit (provides a communications platform for real estate agents and home-buyers) in March. "While there are hundreds of agents using the product daily, our customer base is unfortunately not large enough to continue supporting our loyal users," the company told clients in a message.
Fri, Nov. 14, 1:22 PM
- Off sharply from the levels they saw around the time of their July merger announcement, Zillow (Z +7.1%) and Trulia (TRLA +7.3%) are rallying strongly today even as the Nasdaq barely budges. Volume has thus far been moderate.
- Short-covering could be helping: Zillow and Trulia respectively had 30% and 21% of their floats shorted as of Oct. 31.
- Both companies sold off following Trulia's Oct. 29 Q3 report, and did so again following Zillow's Nov. 5 Q3 report.
Thu, Nov. 6, 9:14 AM
- Gainers: PLNR +74%. PESI +24%. SWIR +20%. MEET +13%. RVLT +11%. COT +11%. DATA +11%. ACAS +10%. NDLS +9%. KATE +8%. KATE +8%. WFM +9%. HZNP +6%. CECO +6%. DRYS +5%. TRUE +5%.
- Losers: AEZS -51%. SZYM -47%. SNMX -26%. GNW -24%. WWWW -22%. CSOD -19%. PHMD -17%. GERN -14%. MCP -12%. GNRC -11%. WAC -9%. QCOM -7%. Z -7%. PBR -5%.
Wed, Nov. 5, 5:51 PM
- Zillow (NASDAQ:Z) guides on its Q3 CC (webcast) for Q4 revenue of $89M-$90M, below a $91M consensus.
- Q3 real estate revenue +86% Y/Y to $65.6M; mortgages revenue +24% to $7.1M; display (ad) revenue +30% to $16M.
- Premier Agent net adds totaled 4,059, raising the total base to 60.877. Average revenue per advertiser rose to $349 from $264 a year ago.
- Excluding acquisition-related costs, total GAAP costs/expenses rose 56% Y/Y to $91.7M.
- As one would expect, all-stock merger partner Trulia (NYSE:TRLA) is following Zillow lower. Both companies also sold off following Trulia's Q3 report.
- Q3 results, PR
Wed, Nov. 5, 4:32 PM
Wed, Oct. 29, 6:11 PM
- Trulia's (NYSE:TRLA) Y/Y Marketplace revenue growth slowed to 78% in Q3 from 142% in Q2, and its Media revenue growth to 26% from 41%. Marketplace was 83% of Q3 revenue, and Media 17%.
- The company's monthly unique visitors rose 36% Y/Y in Q3 to 55M; Q2 growth was 48%. Mobile monthly uniques +89% to 29.9M; growth was nearly even with Q2's 92%.
- Subscribers grew by 3.9K Q/Q to 77.9K. ARPU was $204, down $2 Q/Q and up $8 Y/Y. New contributions to user-generated content rose 5% Y/Y to 1.2M.
- Excluding restructuring costs, GAAP opex rose 76% Y/Y to $89.3M. Cost of revenue totaled $12M, R&D spend $14.9M, sales/marketing $38.9M, G&A $11.6M, and acquisition costs $10.8M.
- Trulia isn't providing guidance ahead of its planned merger with Zillow (NASDAQ:Z). Zillow reports on Nov. 5.
- Q3 results, PR
Wed, Oct. 29, 5:44 PM
Tue, Oct. 28, 6:38 PM
- Facebook beat Q3 estimates, but provided Q4 revenue guidance that was slightly below consensus at the midpoint.
- Twitter (NYSE:TWTR) -1.7% AH; shares fell 9.8% in regular trading due to yesterday's Q3 results and guidance.
- LinkedIn (NYSE:LNKD) -1.6%. Pandora (NYSE:P) -1.2%. YELP -1.6%. Zillow (NASDAQ:Z) -1%.
- Many of the same names sold off after Netflix and eBay's earnings two weeks ago.
Mon, Oct. 6, 5:01 PM
- Zillow (NASDAQ:Z) had 82.8M monthly unique users in September. That's up 42% Y/Y and down 4% M/M (hurt by seasonality and one less day).
- Y/Y growth rose from August's 35% clip, but was below July's 45% and June's 49%.
- Shares are at their lowest levels since May, two months before the Trulia merger was announced.
Tue, Sep. 30, 11:37 AM
- Zillow (Z -2.6%) and Trulia (TRLA -1.8%) are selling off following news rival Move is being sold to News Corp. for $950M.
- News Corp. promises to "use [its] media platforms and compelling content to turbo-charge traffic growth and create the most successful real estate website in the U.S." The media giant also plans to boost Move's "sales and marketing support."
- Move's sites (inc. Move.com) currently reach 35M people/month; Zillow claimed 86.3M monthly unique users in August, and Trulia claimed 54M as of June.
- Zillow and Trulia are respectively down 29% and 27% from their July highs, which were hit amid merger-related euphoria.
Mon, Sep. 22, 1:45 PM
- High-beta tech stocks are selling off hard as the Nasdaq registers a 1.3% decline. The selling is broad-based, with Internet, solar, and enterprise tech stocks all well-represented among the ranks of major decliners.
- Major Internet decliners: BIDU -4.7%. ANGI -7%. YELP -5.9%. AWAY -5.1%. CHGG -5.9%. GRUB -5.8%. P -5.2%. Z -4.6%. TRLA -4.8%. ATHM -7.9%. BITA -7%. DANG -5.9%. WB -5.3%.
- Solar: FSLR -4.5%. SCTY -7.5%. SPWR -4.5%. DQ -7.6%. JKS -5.5%. ASTI -6.3%. ENPH -5.5%. CSIQ -4.8%.
- Enterprise: WDAY -5.4%. GIMO -6.7%. VMEM -7.7%. IMPV -4.8%. MKTO -4.9%. SPRT -5.1%. CSOD -5.5%.
- Others: HIMX -4.6%. SIGM -5.6%. WATT -9.7%. CYNI -5.3%. ADNC -5.7%. PXLW -5%. SWIR -5.8%. MITK -6%. OCLR -6%.
Mon, Sep. 8, 12:20 PM
- Though the title of Andrew Left's presentation tomorrow at the Value Investing Congress - "The Myth of Zulia" - has been known for over a week, it's as good of an excuse as any for today's downward slide in Zillow (Z -4.2%) and Trulia (TRLA -4.2%).
- Citron's original bearish report on Zillow was almost two years ago to the day. The stock's roughly a three-bagger since.
Z vs. ETF Alternatives
Zillow Inc provides vital information about homes, real estate listings & mortgages through its website & mobile applications, enabling homeowners, buyers, sellers etc to connect with real estate & mortgage professionals best suited to meet their needs.
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