Image source: Zillow Group.
What: Shares of Zillow Group (Z +2.46%) (ZG +2.17%) surged 25.3% last month, according to data provided by S&P Global Market Intelligence. The online real estate marketplace's stock price was boosted by a legal settlement that allowed it to put an end to a lawsuit that could have cost Zillow as much as $1 billion.
So what: Zillow agreed to pay $130 million to settle the lawsuit brought by plaintiffs including News Corp. (NWS +2.89%) subsidiary Move.com and the National Association of Realtors. The suit centered on allegations that Zillow obtained trade secrets by hiring former Move executives, allegations Zillow adamantly denied. The settlement doesn't require either side to admit wrongdoing.
Moreover, Zillow will now be able to reallocate the $50 million to $55 million it had set aside for legal costs this year to "support innovation and growth, or margin expansion," said CFO Kathleen Philips.
Now what: That should add even more fuel to Zillow's business, which is already firing on all cylinders. The company is off to a fast start so far in 2016, with revenue jumping 25% year over year to $186 million in the first quarter as Zillow's sites enjoyed record traffic.
Yet even after years of strong growth, Zillow still accounts for only a small portion of the more than $12 billion that real estate agents spend on advertising every year. As the dominant online real estate marketplace -- Zillow Group commands 63% of the online and mobile real estate audience, according to comScore data -- Zillow is poised to capture a much larger share of this massive market in the years ahead. As such, long-term investors who buy Zillow Group stock today should be well rewarded.
