1-Star Stocks Poised to Plunge: Zillow?

Based on the aggregated intelligence of 180,000-plus investors participating in Motley Fool CAPS, the Fool's free investing community, online real estate marketplace operator Zillow (Nasdaq: Z  ) has received the dreaded one-star ranking.

With that in mind, let's take a closer look at Zillow's business and see what CAPS investors are saying about the stock right now.

Zillow facts

Headquarters (Founded) Seattle (2004)
Market Cap $1.3 billion
Industry Internet software and services
Trailing-12-Month Revenue $89.6 million
Management Co-Founder/Chairman Richard Barton
CEO Spencer Rascoff
Trailing-12-Month Return on Equity 5.1%
Cash/Debt $69.6 million / $0
Competitors HomeGain.com
Market Leader
Zaio

Sources: S&P Capital IQ and Motley Fool CAPS.

On CAPS, 60% of the 130 All-Star members who have rated Zillow believe the stock will underperform the S&P 500 going forward.

Just yesterday, one of those bears, Chemdawg, touched on Zillow's seemingly unsustainable valuation:

[I'm] curious to see how the markets react in the next few weeks to QE3 ... but the P/E on [Zillow] is off the charts ... and real discretionary income will decrease as inflation starts to rip the throats out of middle class [A]merican budgets (for those few that actually do budget). [T]his will have a deleterious effect on consumer spending. [N]ot sure how much this will affect housing, but I don't see it helping any.

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Fool contributor Brian Pacampara owns no position in any of the companies mentioned. The Motley Fool owns shares of Zillow. Motley Fool newsletter services have recommended buying shares of Zillow. Try any of our Foolish newsletter services free for 30 days.  We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Fool's disclosure policy always gets a perfect score.


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