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Overvalued Zillow; Energy Troubles: Cramer's Best Blogs

NEW YORK (TheStreet) -- Jim Cramer fills his blog on RealMoney every day with his up-to-the-minute reactions to what's happening in the market and his legendary ahead-of-the-crowd ideas. This week he blogged on:

  • the real estate website Zillow; and
  • the U.S. energy situation.

Click here for information on RealMoney, where you can see all the blogs, including Jim Cramer's -- and reader comments -- in real time.


Zillow Is Overvalued

Posted at 11:44 a.m. EDT on Thursday, Aug. 29

You want power? You want strength? Take a look at Zillow (Z), the heavily shorted real estate Web play that is soaring. The shares are up $6 on the day, and are now trading well above where the company priced its $82 secondary. Considering that the secondary was poorly received initially and broke price immediately, this is a remarkable renaissance. It's the only part of the housing-real estate sector that's doing well -- even as it is by far the most overvalued of all the stocks in the industry.

By contrast, Realogy (RLGY), which represents 26% of all transactions, is barely up today even as it put on its best face on Mad Money last night and sales continue to grow at a 17% to 19% pace. Realogy's now a plus $3 billion company and all it does is list real estate. Despite Realogy's $5 billion in sales, the company is valued at about $6 billion and is barely up this year.

Zillow, with $150 million in revenues, is worth $3.7 billion and is up 240% for the year. That's just a testament to how much people love growth as Zillow could grow revenues as quickly as 60% to 70% for the year. Oh, and did I mention it has no earnings?

You want another wild contrast? Apollo Group (APOL) exited Realogy at $47 and change in a gigantic secondary offering of 25 million shares. The stock's been down ever since then. But Zillow's secondary (also of insider stock) seems to have re-energized the stock after that initial decline.

I think this divergence has less to do with real estate and more to do with a dearth of multiple revenue stream Internet companies. Check out Yelp (YELP) and LinkedIn (LNKD), two other similar business models to Zillow. They just keep running and running.

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