April's strong gain came on the heels of a dreadful March, when Zillow Group shares tanked 39% from $56 to $34 due to the panic over COVID-19. So the stock is still down 21.8% from the end of February.
During April, CEO Rich Barton released his 2019 shareholder letter in which he reviewed some of the company's recent efforts. The company cut 25% of its run-rate operating expenses versus its 2020 plan by taking the following actions:
- Implementing a hiring freeze.
- Reducing and delaying marketing spending.
- Pausing home buying in the Zillow Offers business.
- Reducing all discretionary spending.
These cost savings have helped offset discounts the company offered to agents and brokers for the company's Premier Agent leads.
Zillow also had a blog post in April highlighting that traffic to its portfolio of sites had recently recovered. Page views on listings had plummeted 19% year over year during the week ended March 22. But page views completely reversed during April and were up 15% year over year during the week ended April 15. That seems to indicate buyer interest remains robust.
Another signal that Zillow reported in April was the rate at which site visitors request a connection with a Zillow Premier Agent. Requests to connect dropped sharply in March, but recovered in April and were actually up year over year as of April 15.
Zillow appears to be doing all the right things to preserve cash in this difficult environment. Barton, who spent the early part of his career at Microsoft, included the following story about one thing he and Zillow president Lloyd Frink learned there:
An important lesson Lloyd and I learned from Bill Gates early in our careers is optionality during crises is always greater with cash. Part of Microsoft lore is Bill Gates Sr. advised his son in the earliest days of Microsoft to always have enough cash to run the company for one year without any revenue. That's a lesson we have taken to heart. Zillow Group's cash position affords us more than enough runway to navigate whatever may come.
The $2.5 billion of cash and investments that Zillow held on its balance sheet as of the end of February should ensure that. Long-term investors should consider Zillow well positioned to endure this period and recover strongly on the other side.