What happened

Shares of Zillow Group (NASDAQ:Z)(NASDAQ:ZG) dropped more than 10% in November, according to data from S&P Global Market Intelligence, after the online real estate platform company announced disappointing third-quarter 2018 results

To be sure, Zillow stock plummeted almost 26% on Nov. 7, 2018 alone -- the first trading day after its report hit the wires. But that's not to say Zillow's results looked bad at first glance: Quarterly revenue climbed 22% year over year to $343.1 million, while adjusted EBITDA declined 6.8% to $66.2 million. Both figures were within its guidance ranges provided in early August, which called for revenue of $337 million to $347 million, and adjusted EBITDA of $65 million to $73 million. 

Magnifying glass looking at paper pop-up buildings.


So what

Zillow also enjoyed a healthy 13% increase in visits (to 1.9 billion) to its mobile apps and websites, including Zillow, Trulia, StreetEasy and RealEstate.com. And traffic to those apps and sites hit an all-time high of over 195 million unique users in the month of July.

But Zillow management also warned of near-term headwinds to its reported results, driven by a combination of changes to its Premier Agent lead validation and distribution process, the ongoing ramp of its Zillow Offers homebuying and -selling business, and its newer mortgage origination segment.

Now what

As such, Zillow reduced its full-year 2018 outlook to call for revenue of $1.307 billion to $1.324 billion (down from $1.32 billion to $1.35 billion before), and for adjusted EBITDA of $195 million to $207 million (down from $237 million to $253 million previously). 

"We believe that these changes will have positive long-term effects for consumers, our industry partners and our business," added Zillow Group CEO Spencer Rascoff. "It will take time for advertisers to adapt to these changes, but we are confident that they set us up for long-term growth."

To that end, Zillow Group stock has since partially recouped its initially steep post-earnings losses as the market digested the news. If the company can ultimately prove its headwinds are indeed short-term in nature, I think the stock will inevitably continue to rebound.