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- 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.
Zillow Tells The Market Not To Go Crazy Thinking About Valuations On Trulia Deal
- Zillow's offer to acquire Trulia greatly increases the value of both companies.
- Zillow's valuation surge takes it to the number 1 spot among select internet companies (before Twitter's earnings of course).
- As a result, the market appears to be mispricing execution risk.
Wed, Aug. 6, 9:14 AM
Tue, Aug. 5, 6:30 PM
- Zillow (NASDAQ:Z) expects Q3 revenue of $87M-$88M and full-year revenue of $321M-$323M, above consensus estimates of $82.6M and $310.8M. Full-year adjusted EBITDA guidance has been hiked by $4M to $52M-$54M.
- The figures don't assume any revenue from the Trulia (NYSE:TRLA) merger, which is expected to close in 2015.
- Q2 Marketplace revenue +72% Y/Y to $78.7M, an even growth rate with Q1. Within the segment, real estate revenue rose 83% to $56.1M, and mortgages revenue 13% to $6.6M.
- Display (ad) revenue +53% Y/Y to $16.1M, after growing 62% in Q1.
- Premier Agent subs rose by 3,850 Q/Q to 56.8K; 4,654 were added in Q1. ARPU rose to $320 from $286 in Q1 and $266 a year ago. Monthly unique users rose 49% to 81.1M, and mobile visits nearly doubled.
- With marketing and R&D spend remaining aggressive, GAAP costs/expenses rose 56% Y/Y to $89.4M. Sales/marketing spend made up $48.1M of the total.
- Zillow is nearly unchanged AH. Trulia is up 1.1%.
- Q2 results, PR
Tue, Aug. 5, 4:34 PM
Mon, Jul. 28, 12:47 PM
- Zillow's (Z -1.5%) purchase of Trulia (TRLA +13.3%) signals Zillow plans to create a portfolio of online real estate assets much as InterActiveCorp has created a portfolio of online dating assets, says CEO Spencer Rascoff. "What's taking shape is the creation of a real estate media company." Move (MOVE +8.9%) investors might be pleased to hear that.
- Though Trulia's brand will stay independent, Zillow and Trulia predict the deal will yield at least $100M/year in cost savings by 2016. Other expected synergies include: 1) Better real estate data for consumers thanks to data-sharing between Zillow/Trulia. 2) Common ad services/marketing platforms that can yield a better ROI. 3) Broader listing distribution.
- The companies note they still only account for 4% of estimated U.S. real estate marketing spend of $12B/year. Zillow has 83M monthly unique users, and Trulia 54M (some overlap exists).
- Street commentary has been quite positive. Macquarie: "This could pave the way to these companies becoming more profitable more quickly." CRT Capital: "At the end of the day, this provides scale. And scale ultimately leads to more advertising on the overall network."
- Prior Zillow/Trulia coverage
Mon, Jul. 28, 8:37 AM
- The combined company will maintain both the Zillow (NASDAQ:Z) and Trulia (NYSE:TRLA) brands, and Trulia CEO Pete Flint will remain so, reporting to Zillow chief Spencer Rascoff.
- As for terms, Trulia owners will receive 0.444 shares of Zillow for each share of Trulia they hold, valuing Trulia at a 25% premium to its Friday close.
- A conference call is set for 9 ET.
- Source: Press Release
- TRLA +16.8% to $65.76, Z -2.6% to $154.70 premarket
Fri, Jul. 25, 1:53 PM
- "It's a blockbuster ... What this says is, Zillow has been and has locked up the absolute dominant position in online real estate in the United States,” says real estate analyst Steve Murray on reports Zillow (Z +4.6%) is looking to acquire Trulia (TRLA +2%).
- Barclays' Christopher Merwin predicts a merger would "dramatically increase the combined entity's pricing power" with real estate agents, and would yield more leverage in price negotiations with MLSs. Zillow just bought MLS data-integration software platform provider Retsly.
- Murray admits there could be a backlash to the deal, stating "the industry will be concerned ... if you have one huge, overwhelmingly dominant player" for whom agents "will be almost compelled" to list on.
- Bloomberg reports Zillow could pay for 1/3 of the purchase in cash (implies a $667M cash payment at a $2B acquisition price), and 2/3 in stock. Zillow had $446M in cash/investments at the end of Q1.
- While Zillow and Trulia continue to rally, Move (MOVE -2.8%) is now below where it traded before the first merger report broke.
Thu, Jul. 24, 2:23 PM
- A source tells Bloomberg Zillow (Z +18.8%) could value Trulia (TRLA +28.7%) at up to $2B in a deal. That would imply an acquisition price of ~$54/share.
- The source adds a deal could be announced as soon as next week. Bloomberg cautions talks remain ongoing.
- The rumored price represents a ~33% premium to Trulia's Wednesday close. Nonetheless, it values the company at 6x 2015E sales, a multiple well below the 12x sported by Zillow as of yesterday's close.
- Perhaps more importantly, there's plenty of enthusiasm on the Street for a deal that would create a clear-cut leader in what remains a very fragmented online real estate market that still only accounts for a small (but growing) fraction of total U.S. real estate services spend.
- Earlier: Zillow reportedly looking to buy Trulia
Thu, Jul. 24, 2:05 PM
- Bloomberg reports Zillow (Z +18%) is looking to acquire Trulia (TRLA +21.6%). Shares of both companies have skyrocketed in response. Move (MOVE +5.2%) is also getting a lift.
- The report comes 9 days after Realogy announced it's buying ZipRealty for a 100%+ premium.
- Zillow's market cap is currently at $5.9B, and Trulia's at $1.9B.
Wed, Jul. 16, 5:01 PM
- Vancouver-based Retsly offers a platform (replete with an API) that allows real estate app developers to integrate data from multiple listing services (MLSs), and also provides MLSs tools for managing and tracking real estate apps/data. (PR)
- CEO Spencer Rascoff: "Retsly's platform will spur tremendous innovation in the real estate space, enabling developers to build software that works across MLS boundaries and without the overhead of dealing with local data formats."
- The purchase price is undisclosed. Zillow (NASDAQ:Z) plans to add Retsly's offerings to its Tech Connect program (launched last November), which allows 3rd-party software/service providers used by brokers and agents to integrate their systems with Zillow's. The company recently announced it now has 25 Tech Connect partners.
Tue, Jul. 15, 4:15 PM
- The online real estate space heats up some more with Realogy's (NYSE:RLGY) all-cash, $166M deal to buy ZipRealty (NASDAQ:ZIPR). The price works out to $6.75 per share vs. today's close of $3.02.
- The purchase adds ZipRealty's residential brokerage operations with 23 U.S. offices and its integrated real estate technology platform to Realogy's operations. ZIPR last year closed $2.7B in property sales, giving it $76M in revenue and $32M of gross profit. Realogy expects EBITDA contribution from the purchase to be about $20M annually within the next three years.
- Zillow (NASDAQ:Z) +0.3%, TRLA +0.4%, MOVE +0.3% AH
- Source: Press Release
Fri, Jul. 11, 11:43 AM
- Zillow (Z -0.3%) had 83M monthly unique users in June, +2% M/M (hurt by one less day) and +49% Y/Y. The Y/Y growth rate is even with May's.
- Trulia (TRLA +0.7%) says its monthly unique visitors topped 54M in June, up from May's 51M+. With the help of aggressive marketing, Y/Y growth accelerated to 55% from May's 47% and Q1's 42%.
- Both companies have easily outperformed the Nasdaq this year (Zillow especially). Zillow now goes for 12.4x 2015E sales, and Trulia 4.5x 2015E sales.
Wed, Jun. 25, 4:00 PM
- After talking with CEO Spencer Rascoff, JMP thinks Zillow's (Z +6.1%) consumer and agent share gains are accelerating. The firm also thinks Premier Agent ARPU and EBITDA margin increases, and the expansion of rentals business, could act as catalysts.
- Last week, Canaccord cited Premier Agent's growth potential as a reason (among others) for upping its Zillow target.
- JMP's PT has been hiked by $36 to $150. Zillow is now up 71% YTD, and ~7x from its $20 2011 IPO price.
- Trulia (TRLA +4.1%) and Move (MOVE +3.8%) are following Zillow higher on a good day for tech. Trulia announced today it's launching a smartwatch app for Google's Android Wear platform. The app will show home alert notifications from Trulia's Android phone app, and allow users to swipe through photos and property details.
Tue, Jun. 17, 2:52 PM
Mon, Jun. 16, 2:40 PM
- Following meetings with Zillow's (Z +3.4%) CFO, sales chief, and mortgage head, Canaccord thinks the company's Premier Agent business remains strong, and that its mortgage and rentals businesses are making nice progress. The firm's PT has been upped by $15 to $130.
- Canaccord observes only ~53K of the 675K+ real estate agents with Zillow profiles have thus far advertised on the site, leaving plenty of room for growth.
- Likewise, it believes less than 25% of the ~350K "thought-leading, high-producing agents" out there are on Zillow or Trulia (TRLA +3.8%), and that Zillow only captures 2% of real estate ad budgets and 4% of available transaction sides.
- The firm sees more dynamic pricing boosting Zillow's growth. It also see a Zillow/Trulia merger as possible down the line, arguing it "could be quite accretive to Zillow even before factoring in any revenue synergies from pricing power."
- Zillow and Trulia rose last Friday after Trulia released positive May traffic data.
Fri, Jun. 13, 11:32 AM
- Trulia (TRLA +2.5%) saw a record 51M+ unique visitors in May, up from nearly 50M in April and 47% above year-ago levels. The Y/Y growth rate represents a pickup from Q1's 42% clip.
- Trulia's standalone audience (excludes Market Leader) grew 29% Y/Y, up from Q1's 18% rate. A $45M national ad campaign (previous) contributed to the growth.
- Zillow (Z +1.8%) and Move (MOVE +2.5%) are following Trulia higher. Zillow, which has also been ramping its ad spend, saw 81.5M monthly unique users in May, +3% M/M and +49% Y/Y.
Thu, Jun. 5, 8:15 AM
- It's another valuation call, with SunTrust pulling its Buy rating after Zillow's (Z) big run higher.
- "While we remain very bullish on the long term prospects for the company ... we think the market has accounted for some of the opportunity, making the stock expensive in the short term to our coverage universe at 11.2x 2015 revenues and 55x 2015 EBITDA."
- Shares -1.6% premarket
- Previously: Zillow slips after downgrade at Pacific Crest
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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