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Why Zillow Group Stock Soared 21% in February While the Market Got Clobbered

By Beth McKenna - Mar 6, 2020 at 9:20AM

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Shares of the online real estate platform bucked the coronavirus-driven market sell-off last month.

What happened

Shares of online real estate marketing services company Zillow Group (Z 0.98%)(ZG 1.72%) hit a "home" run in February, with Class C shares (ticker symbol "Z") up 20.8% and Class A shares ("ZG") gaining 20.5%, according to data from S&P Global Market Intelligence.

Those performances were even better than they might seem at first glance when you consider that the S&P 500 index dropped 8.2% last month. The market's sell-off was driven by concerns that the fast-spreading novel coronavirus, COVID-19, could curb global economic growth.

Zillow Class C shares edged down 0.7% over the first three trading days of March through Wednesday, while Class A shares were flat over this period. That brings their year-to-date 2020 gains to 18.1% and 18.8%, respectively. This compares with the broader market's negative 2.8% return so far this year. 

A woman standing in a room full of cardboard boxes and holding a sign that says "sold"

Image source: Getty Images.

So what

We can attribute Zillow stock's powerful performance last month largely to the tech company's Feb. 19 release of fourth-quarter 2019 results and first-quarter 2020 guidance that delighted investors. Class C and Class A shares popped 16.8% and 17%, respectively, the next day, and they each tacked on a couple more percentage points the day after that. 

In Q4, revenue rocketed 158% year over year to $943.9 million, easily topping the $814.6 million Wall Street consensus estimate. Growth was driven by rapid expansion within the homes segment and solid growth in the premier agent business. The latter is Zillow's real estate agent advertising business. Adjusted for one-time items, the company posted a loss per share of $0.26, narrower than the loss of $0.35 per share that analysts were expecting.

Z Chart

Data by YCharts.

As the chart shows, shares of Zillow gave back some of their gains at the end of the month. Shares declined along with the broader market when news came out that COVID-19 had spread well beyond China, where it originated. 

Now what

For the first quarter of 2020, management guided for revenue between $1.021 billion and $1.056 billion. This represents growth of 125% to 133% year over year. Going into the fourth-quarter earnings release, Wall Street had been modeling for Q1 revenue of just $912.4 million.

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Zillow Group, Inc. Stock Quote
Zillow Group, Inc.
$40.92 (1.72%) $0.69
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Zillow Group, Inc.
$41.36 (0.98%) $0.40

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