Zillow Reports Higher Revenue and Narrow Q2 Loss
Zillow (NYSE: Z) experienced a drop in share prices despite reporting stronger revenue and a smaller-than-expected loss for the second quarter. The company disclosed total revenue of $506 million and a net loss of $35 million based on generally accepted accounting principles (GAAP). Analysts had predicted revenue of $473 million and a GAAP loss of $63 million. Zillow's adjusted earnings before interest taxes, depreciation, and amortization (EBITDA) stood at $111 million.
Steady Progress in a Challenging Real Estate Market
Zillow CEO Rich Barton expressed satisfaction with the company's performance, stating, "Zillow has consistently outperformed the broader industry over the past four quarters amidst the challenges of the real estate market. We have made significant strides in enhancing and integrating the experiences of our customers and partners, particularly in areas such as touring, financing, and renting."
Despite an initial uptick following the earnings announcement, Zillow's share prices dipped by 1.35% to $53.50 at 5:23 p.m. during after-hours trading.
Lower Guidance Impacts Share Prices
The decline in share prices can be attributed to Zillow's projected guidance for the next quarter. The company anticipates total revenue falling within the range of $458 million to $486 million, which is lower than the FactSet consensus estimate of $488 million.
In a shareholder letter, Zillow discussed its strategic aim to establish itself as "the housing super app," serving as a comprehensive platform for various real estate-related services. CEO Rich Barton and CFO Jeremy Hofmann outlined their vision for doubling Zillow's share of customer transactions from 3% to 6% by the end of 2025 through this "super app" strategy.
This transition to a "super app" approach follows Zillow's decision to discontinue its home buying and selling program, known as iBuying. The company halted the program in November 2021 and classified it as a discontinued operation in November 2022.
Zillow's Earnings Surpass Expectations, Driven by Premier Agent and Rentals
Zillow, a prominent real estate company, has recently announced its earnings, showcasing a robust performance from its lead generation service, Premier Agent. The service connects potential buyers with agents who avail themselves of this paid service. Despite a slump in Zillow's Residential segment, which encompasses the Premier Agent program, the company managed to exceed expectations by earning $380 million, a mere 3% decline from the previous year. Zillow had initially projected residential revenue to fall between $341 million and $361 million. Impressively, the decline in revenue from the Premier Agent program was only 4%, compared to the anticipated 9% to 13% drop.
In a shareholder letter, Zillow's executives Eric Barton and Arik Hofmann lauded the outperformance of their Residential revenue, which surpassed both industry norms and their own conservative estimates. They attributed this success to their ability to provide an exceptional number of customer connections to their Premier Agent partners. Furthermore, Zillow's Residential revenue was buoyed by favorable industry conditions.
Additionally, Zillow experienced a surge in its rental revenue, reaching $91 million compared to the previous year's $71 million. This growth can be attributed to a combination of decreased rental demand and an increased supply of new listings on the market. Landlords were drawn to Zillow's platform as they sought effective means of advertising their available properties.
These impressive earnings arrive at a time when the housing market is witnessing unusual dynamics. While sales of pre-owned homes have declined compared to the previous year, sales of new homes have seen an upswing. In light of these circumstances, Zillow and Redfin recently announced a partnership. As part of this collaboration, Redfin will syndicate Zillow's new home listings, creating new opportunities for both companies.
All Rights Reserved © 2024
Post a comment