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Zillow Rises: What Wall Street Is Saying

NEW YORK (TheStreet) -- Zillow (Z) shares rose in premarket trading Thursday after the Seattle-based online real estate company reported fourth-quarter earnings and 2014 guidance that was mixed.

For the fourth quarter, Zillow earned 20 cents a share on a non-GAAP basis on revenue of $58.3 million; revenue from Marketplace increased 71% to a record $45.9 million from $26.8 million in the fourth quarter of 2012. 

The company noted revenue from Real Estate grew 71% year over year to $40.5 million, while Mortgages Revenue grew 69% to $5.3 million, and Display Revenue increased 67% to $12.5 million.

Analysts surveyed by Thomson Reuters were looking for the company to earn 7 cents a share in the fourth quarter on $54.43 million in sales. 

Shares of Zillow were rising in premarket  Thursday trading, gaining 0.17% to $90.

Z ChartZ data by YCharts

Wall Street analysts were by and large positive on Zillow shares following the results, though the guidance did warrant some caution. Here's what a few of them had to say:

Benchmark Company analyst Daniel Kurnos (Overweight, $105 PT)

"Zillow (Z-Buy, PT $105) reported an upside surprise in 4Q on both the top and bottom line. Revenue of $58.3 million, up 70% y/y, was $2 million ahead of consensus and our forecast, although the upside was driven almost entirely by outperformance in Display. EBITDA of $15.2 million was roughly $6 million ahead of consensus, primarily reflecting a significant pullback in advertising spend, driving EBITDA margin up to over 26%. The outlook for 2014, however, was mixed, with the mid-point of revenue guidance at $291 million representing 47% y/y growth and coming in $8 million ahead of consensus, but EBITDA guidance of $38-$40 million implying 200bps of margin compression y/y at the midpoint, again mostly due to aggressive marketing plans. Given the significant upside generated on the topline over the balance of 2013 (~$25 million vs. initial guidance), we're willing to give management the benefit of the doubt, particularly given that 2014 guidance assumes no benefit from adjacent marketplace monetization outside of Mortgage."

Pacific Crest Securities analyst Chad Bartley (Outperform, $105 PT)

"Buy Z. Q4 revenue growth accelerated and subscriber growth decelerated slightly to 64%. Momentum is strong entering 2014, and while initial guidance is encouraging, we believe there is upside potential from pricing and rentals. We are raising our target."

Deutsche Bank analyst Lloyd Walmsley (Hold, $80 PT)

"We maintain our Hold rating on Zillow shares, as an already-stretched valuation appears more so  following the company's guide for more ad spend in 2014. We continue to prefer Trulia shares (CP $33.80) given the meaningful valuation discount, despite similar revenue scale, more agent relationships and a promising 2014 outlook. The increase in ad spend helps maintain user growth but we expect diminishing marginal returns on the ad spend ramp particularly in the event that competitors (e.g. Realtor.com and Trulia) ramp ad spend. We reduce our PT to $80 (from $87) using the same valuation multiples on lower profitability in light of the ad spend."

-- Written by Chris Ciaccia in New York

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