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The Case For A Bearish Outlook On ZIllow (Z)

|Includes: Zillow Group, Inc. (Z)

Here's a short write up of why I bought puts against Zillow:

trend analysis is an incomplete picture of Zillow.

Let's look at the fundamentals;

-Zillow continues to bleed money as if its jugular was slit open, and this is not a new company (we have to stop treating it like a freshly-IPO'd growth stock)

-Zillow has no way to generate significant cash flows in the United States, so growth in user metrics will not lead to profits; recent rise in stock price is due to increase in user metrics... this will be like shorting a company that has growing revenue and a negative profit margin

-Zillow is in danger of become nothing more than a hyperlink site to Realtor sites that provide non-truncated listings (see link below):

www.inman.com/2014/12/12/my-florida-regi.../

-Zillow also depends on almost all of its access (85% !!!) to listing data from syndicates owned by Rupert Murdoch, who also owns Zillow's largest direct competitor site (see link above).

-Zilllow has a history of diluting their shares worse than the Bavarians do to tourists' beer at Oktoberfest

-Executives who receive stock options don't seem to want to hang on to them (this may be the biggest red flag on Zillow)

I just made a killing on puts in TSLA over the last few weeks. Get some puts in Zillow (I would not go for the shortest term puts until the shorts start coming in hard against Zillow. Time horizon is important; (in this case, I like puts with Jan-March expiration), and I expect shorts to trigger a 30-50% correction on this momentum stock. I am also considering one year puts, as risk of bankruptcy rises as they overextend themselves and put their ability to raise capital at risk with their history of share dilution and huge operating losses

Disclaimer: Author is short on Zillow. Invest at your own risk; this is not an investment recommendation, but rather the author's statement of reasoning behind his motivations for his position on the stock. There is no such thing as a sure thing, and, like other investments, all principal can be lost if an individual decides to make an investment. This is not a solicitation to offer financial services, but merely the reasoning behind the author's investment.

Disclosure: The author is short Z.

Additional disclosure: Author is short on Zillow. Invest at your own risk; this is not an investment recommendation, but rather the author's statement of reasoning behind his motivations for his position on the stock. There is no such thing as a sure thing, and, like other investments, all principal can be lost if an individual decides to make an investment. This is not a solicitation to offer financial services, but merely the reasoning behind the author's investment.