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Why Zillow Group Stock Popped on Friday

By Joe Tenebruso – May 12, 2019 at 10:00AM

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The online real estate leader is enjoying robust demand for its new home-buying business.

What happened

Shares of Zillow Group (ZG 2.61%) (Z 2.44%) rose more than 5% on Friday, following the company's solid first-quarter results. 

So what

Zillow's revenue surged 51% year over year to $454 million. That topped Wall Street's estimates and was well above Zillow's own guidance for revenue of $417 million to $443 million. And although Zillow delivered a larger net loss of $0.33 per share, this figure was also better than the $0.35 loss analysts had anticipated. 

A person drawing an upwardly sloping line labeled sales

Image source: Getty Images.

Zillow's revenue gains were driven in part by the rapid expansion of its homebuying service. The company purchased 898 homes, 80% more than it did in the fourth quarter. It also sold nearly 200% more homes, and the 414 home sale transactions it completed in the first quarter helped generate $128.5 million in revenue.  

"We delivered strong first-quarter results that met or exceeded our own expectations in all segments as our plan to streamline the real estate transaction comes together," co-founder and CEO Rich Barton said in a press release. "Zillow Offers' incredible consumer demand and rapid growth give us confidence we're in the early stages of something important." 

Now what

Analysts have questioned Zillow's ability to reach its ambitious growth targets. Some have gone so far as to question whether Zillow Offers will ever be profitable. But Zillow is adamant that its new homebuying service has tremendous potential to grow revenue and profit exponentially in the years ahead. 

If Zillow's correct, then Friday's gains could be just the beginning of a far larger upside move for the stock in the coming years.

Joe Tenebruso has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Zillow Group (A shares) and Zillow Group (C shares). The Motley Fool has a disclosure policy.

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Stocks Mentioned

Zillow Group, Inc. Stock Quote
Zillow Group, Inc.
ZG
$29.83 (2.61%) $0.76
Zillow Group, Inc. Stock Quote
Zillow Group, Inc.
Z
$29.76 (2.44%) $0.71

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