IIt has been about a month since the last Zillow Group (ZG) earnings report. Stocks lost around 1.4% over that time frame, underperforming the S&P 500.
Will the recent negative trend continue until its next earnings release, or is Zillow likely to break out? Before we dive into how investors and analysts have reacted in recent times, let’s take a look at the latest earnings report to better understand the important catalysts.
Zillow Group Profits and Revenue in Q1 Surpass Estimates
Zillow Group reported non-GAAP earnings of 44 cents per share in the first quarter of 2021, which was 83.3% higher than Zacks’ consensus estimate. The company had reported a loss of 25 cents in the quarter of last year.
Total revenue of $ 1.218 billion was 10.7% above Zacks’ consensus estimate. In addition, revenues increased 8% year-over-year on the strength of the Internet, Media & Technology (IMT) and mortgage segments.
Revenues for the Homes segment (57.8% of total revenues) amounted to $ 704.2 million, down 9% year-over-year.
During the quarter, Zillow Group bought 1,856 homes and sold 1,965 through Zillow Offers. The company ended the quarter with 1,422 units in inventory, up from 1,531 units at the end of the fourth quarter.
In particular, the Zillow Group had temporarily halted home buying activity for Zillow Offers in all of its markets due to the pandemic. The company has resumed operations for Zillow Offers in all 25 markets, which includes the recent expansion of Zillow Offers in Jacksonville, Florida. The company has also expanded its Zillow closing service to 25 markets in 2020. The company also expects the launch of Zestimate to increase revenue, going forward.
Zillow Offers revenue was $ 700.9 million, while Other Homes revenue was $ 3.18 million. Notably, Other Homes segment revenue includes revenue generated from Zillow’s closing services.
IMT segment revenues (36.6% of total revenues) increased 35% year-on-year to $ 446 million in the current quarter. The benefit can mainly be attributed to robust traffic growth as well as increased Premier Agent connections and higher demand for services in the markets of the Other IMT segment.
The Zillow Group is optimistic about its business due to the increase in demand for residential real estate. The company leverages the capabilities of its platform, such as proprietary Zillow 3D Home technology which enables virtual tours of Zillow-owned homes and virtual consultations of the company’s broker and Premier agents to assist potential buyers despite the challenges. movement restrictions.
Premier Agent revenue totaled $ 334 million, up 38% year-over-year.
Revenues from other IMT segments jumped 26% year-on-year to $ 112 million due to higher rental revenues and strong adoption of new product offerings.
Other revenues in the IMT segment include revenues generated from rentals, new construction and signage as well as other marketing and sales products and services to real estate professionals.
Mortgage segment revenues (5.6% of total revenues) increased 169% year-over-year to $ 68 million, driven by improved mortgage origination revenues.
Traffic to mobile apps and websites increased 15% year over year to reach 221 million average monthly unique users for the three months ended March 31, 2021. Visits were 2.511 billion , up 19% year-on-year.
Zillow’s average gross margin per home in the first quarter jumped 103% year-over-year to $ 32.7,000. In addition, the average return on homes sold before interest charges increased by $ 19.6,000 per home.
Adjusted EBITDA was $ 181 million in the first quarter compared to Adjusted EBITDA of $ 5.1 million reported in the prior year quarter.
Homes’ adjusted EBITDA loss was $ 34 million, lower than the loss of $ 75 million in the prior year quarter. Adjusted EBITDA income from mortgages was $ 6.4 million, compared to a loss of $ 5.6 million for the prior year quarter. However, IMT reported Adjusted EBITDA of $ 208.6 million, up 143% year over year.
Total consolidated costs and operating expenses decreased 11% year over year to $ 1.1 billion due to lower cost of revenues in the Homes segment as well as selling expenses and reduced marketing.
Zillow Group’s net profit was reported at $ 52 million compared to a net loss of $ 163.3 million reported in the last year quarter.
As of March 31, 2021, cash and cash equivalents and short-term investments were $ 4.7 billion, compared to $ 3.9 billion as of December 31, 2020.
For the first quarter, cash flow from operating activities was $ 241.7 million.
For the second quarter of 2021, total revenue is expected to be between $ 1.236 billion and $ 1.284 billion thanks to the strength of the IMT segment.
IMT segment revenue is expected to be between $ 459 million and $ 472 million, with Premier Agent revenue between $ 342 million and $ 350 million.
Home revenues are expected to be between $ 720 million and $ 750 million. Mortgage income is expected to be between $ 57 million and $ 62 million.
In addition, adjusted EBITDA is expected to be between $ 116 million and $ 140 million.
How have the estimates evolved since then?
It turns out that revised estimates have trended upward over the past month. The consensus estimate has changed by -200% due to these changes.
At present, Zillow has an excellent growth score of A, although it is way behind the Momentum score front with an F. Tracing a somewhat similar path, the stock received a D rating. on the value side, putting it the bottom 40% for this investment strategy.
Overall, the stock has an overall VGM score of C. If you’re not strategy-focused, this score is the one you should be interested in.
Estimates have broadly trended upward for the stock, and the magnitude of these revisions has been net of zero. Notably, Zillow has a Zacks Rank # 3 (Hold). We expect the stock to come back online in the coming months.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.