Zillow Surges After Beating Earnings Expectations

Zillow's revenue registered $789 million in the fourth quarter, down 16% from last year, but far above the analyst consensus of $740.5 million.

Zillow Group  (ZG) - Get Zillow Group, Inc. Class A Report reported stronger-than-expected earnings for the fourth quarter after the market closed Wednesday

The company has benefited from strong demand for residential real estate during the Covid pandemic.

Revenue registered $789 million in the fourth quarter, down 16% from $944 million a year earlier, but far above the FactSet analyst consensus of $740.5 million. Net income totaled $46.036 million, swinging from a loss of $101.21 million last year.

Adjusted earnings per share hit 44 cents, blowing away the analyst consensus of 28 cents.

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Zillow shares rose $19.50, or 12%, to $184.20 in after-hours trading Wednesday. The stock fell 2.4% during the regular trading session.

Before the earnings report, Morningstar analyst Yousuf Hafuda put fair value for the stock at $42. “We currently view shares as significantly overvalued, with the stock price being buoyed by unexpected strength from the housing market,” he wrote after the last earnings report on Nov. 6, when the stock closed at $119.58.

“We note that investors have also flocked to this name due to a perception of countercyclicality given the residential real estate industry’s increased reliance on technology to execute transactions,” Hafuda said.

“ Although we agree that such dynamics bode well for Zillow, we think its continued focus on the speculative iBuying business will hamper long-term profits. Given that its IMT [internet, media, and technology] segment has been the firm’s star performer during the coronavirus crisis, we would improve our outlook if it becomes clear that the segment will become a renewed area of focus for the firm.”

In trading premarket Thursday, Zillow Group is up 12.63%.