The stock market was having a mixed session on Friday, with all three major indexes largely unchanged not quite an hour into the trading day. But real estate technology giant Zillow Group (Z 1.68%) (ZG 1.63%) was a big outperformer, with shares rising by more than 14% as of 10:30 a.m. ET.
Zillow issued its first quarterly earnings report since it decided to abruptly exit the iBuying business, and investors finally have a reason to smile.
Most importantly, the wind-down of the remaining iBuying inventory is proceeding at a faster pace and in a more profitable manner than expected. Zillow was expecting to sell 5,000 of the roughly 18,000 homes it had in inventory at the start of the fourth quarter, and it sold 8,353. CEO Rich Barton said the real estate sales were not only faster, but at "better unit economics" than anticipated.
Sure, Zillow's business operated at a loss, but it was solely because of these home sales (which were expected to lose money). In the company's core business, revenue grew 14% year over year and came in above analyst expectations.
Going forward, Zillow believes that it can scale its core business to $5 billion in revenue per year with a 45% adjusted margin by 2025, which would translate into $2.25 billion in annual income. For context, revenue in this part of Zillow's business is just under $2 billion (annualized) today, based on fourth-quarter numbers. With a market cap of just over $14 billion now, Zillow's current price could end up looking like a bargain if it can achieve this ambitious target.