COMPANY PROFILE

Zillow Group, Inc. (NASDAQ: Z and ZG) is reimagining real estate to make it easier to unlock life's next chapter. As the most visited real estate website in the United States, Zillow® and its affiliates offer customers an on-demand experience for selling, buying, renting or financing with transparency and ease. 

Zillow Group's brands, affiliates and subsidiaries include Zillow®, Zillow Offers®, Zillow Premier Agent®, Zillow Home Loans™, Zillow Closing Services™, Zillow Homes, Inc., Trulia®, Out East®, ShowingTime®, Bridge Interactive®, dotloop®, StreetEasy® and HotPads®. Zillow Home Loans, LLC is an Equal Housing Lender.

SEATTLE, Dec. 2, 2021 /PRNewswire/ -- Zillow Group, Inc. (NASDAQ: Z and ZG) today announced it has made significant progress in winding down Zillow Offers inventory and has sold, is under contract to sell or has reached agreement on disposition terms for more than 50% of the homes it expected to resell during the entire wind-down process. Zillow Group's Board of Directors has also authorized the repurchase of up to $750 million of its Class A common stock, Class C capital stock or a combination of both. “We are pleased with the progress of our wind-down efforts and recognize that no longer operating Zillow Offers will allow us to have a more capital-efficient balance sheet and business moving forward," said Zillow Group co-founder and CEO Rich Barton. "With that, we see today as an opportune time to announce a share repurchase program and reduce the cash balance we built up to support Zillow Offers." 

The company announced its plan to wind down Zillow Offers operations and provided outlook for Q4 on Nov. 2, 2021. With the current wind-down progress, the company is updating its Q4 2021 Homes segment revenue outlook to a range of $2.3 billion to $2.9 billion from $1.7 billion to $2.1 billion. 

"We are pleased with the significant Zillow Offers inventory wind-down progress we've made in such a short time," said Zillow Group CFO Allen Parker. "We will continue to be disciplined in our inventory wind-down strategy and evaluate a variety of options to best optimize net cash flows to the company."

 

Style Factor Benefits

From a factor scoring perspective versus the other 199 brands in the brands index, here’s where Zillow scores well as of 12/30/21:

  • 91% high 3 year sales growth

  • 73% attractive margin expansion

  • Contrarian signal - negative momentum, massive turnover in shareholder base and very oversold

  • 91% change in forward sales estimate revisions

  • 99% max oversold offering contrarian buy signal

  • 85% high short interest offering potential short squeeze potential

  • 80% strong 1 year EPS growth

 

12/30/21 Update

In the span of 1 year, Zillow has gone from a perennial favorite to a spotted skunk. The truth always lives somewhere in the middle. Zillow and founder Rich Barton like to think outside the box and invent new markets. Rich has a strong history of creating and selling brands. Zillow’s flawed home improvement/flipping business was a rare mis-step by this strong executive. Perhaps the market is just too hot and the margins between buying homes in mass quantities and flipping them to someone else are simply not scalable for a host of reasons. The stock is down 70% from its peak in February 2021, that’s one massive drawdown and a complete turnover of their shareholder base. When high growth investors and hedge funds leave the building, they do not leave quietly and they are not price sensitive. I added a small tactical position in Zillow because their core business in real estate services is still very relevant. Now that the stock has been re-set, at the very least I think there’s a chance for a strong oversold bounce. The firm has set the bar very low for future quarterly earnings and has laid off 25% of the workforce and seems to be finally focused on running a lean, superior core business that does have strong brand awareness and loyalty. They have removed themselves from the home selling business and will be taking charges and write-downs no doubt but the stock looks pretty bombed-out to me and they recently announced a $750m buyback authorization after this 70% drawdown. I think the risk/reward for this company sets up pretty well and the business is set up for better times ahead. To be sure, it will be a show-me stock and they need to prove to the street they are back on track. That’s why I took a small starter position that I can beef up as I have positive confirming datapoints.