Zillow (ZG) stock roars higher after plans to replace home-flipping business - Kalkine Media

February 11, 2022 10:10 AM PST | By Rupam Roy
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Highlights

  • Zillow's revenue rose 392% YoY in Q4, FY21.

  • Its full-year 2021 revenue grew 144% YoY.

  • Zillow expects its new project to provide an annual revenue of US$5 billion by 2025 end.

Shares of Zillow Group, Inc (NASDAQ: ZG) roared higher by 12% on Friday after it hinted at launching a “housing super app” to replace its loss-making home-flipping business.

CEO Rich Barton said in the earnings release on Thursday that a new "housing super app" would be the next step as the company rapidly unwinds its home-flipping business, Zillow Offers. 

After closing in the red in the previous session, Zillow (ZG) shares surged more than 12% in the premarket.

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The Seattle, Washington-based company’s revenue jumped 392% YoY to US$3.88 billion in the fourth quarter of fiscal 2021, helped by the winding down of its loss-making division.

Zillow had lost US$528 million in the home-flipping unit in 2021. The division contributed most of its revenue in recent years but did not provide any profit.

Its fourth-quarter net loss was US$261.20 million. Zillow Group’s full-year revenue jumped 144% YoY to US$8.14 billion, of which Zillow Offers contributed around US$6 billion.

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Zillow’s announcement to wrap up the venture in November had surprised many investors.

Zillow Offers, a tech-driven platform, failed to predict home price movements accurately.

The unit trimmed about 2,000 jobs, or 25% of its staff, after losing more than US$0.50 billion in value of the remaining homes connected with the platform.

The move had triggered a stock sell-off, wiping out over US$35 billion of its valuation.

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Zillow Group (ZG) stocks soared on positive guidance

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What's next?

The company's strong home sales helped reduce its anticipated write-downs. Its adjusted EBITDA loss of US$0.40 million topped average analysts' estimates.

Zillow CEO Rich Barton said the rapid unwinding of its home-flipping business enabled the company to move to its next target - developing a "housing super app". He said the app would integrate the current gaps in the home-buying- and -selling process.

Barton said the project would aid the house-hunters in scheduling tours and getting loans. The business would provide an annual revenue of around US$5 billion, with a 45% margin on EBITDA by 2025 end.

The Zillow (ZG) stock was priced at US$53.95 at 8:34 am ET, up 12.72% from its previous close. It has a market cap of US$12.19 billion. The stock value fell 76.14% over the last 12 months.

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Bottomline

Zillow investors have welcomed the decision on closing its home-flipping business. In the fourth quarter, the company sold 8,300 homes, topping Wall Street estimates.


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