What happened

Shares of online real estate company Zillow Group (Z -0.46%) (ZG -0.69%) jumped 21% in November, according to data provided by S&P Global Market Intelligence. Several positive factors came together to uplift investor sentiment last month, notably a better-than-expected third-quarter earnings report and the final closing out of its iBuying business.

So what

Zillow was a hot stock not too long ago. It gained more than 600% from March 2020 through February 2021, when the pandemic started and everything shifted online. It's lost 80% of its value since then.

That initial descent was largely due to falling investors' confidence in unprofitable growth stocks, but there was a sharp drop a year ago when Zillow announced it would close its iBuying business. Investors ran from the stock as it scrambled to pull together what was left of its business.

In the year since, it's made some decent progress. So much so that investors are on their way back.

The iBuying business, which involved purchasing large blocks of homes and reselling them on its website, was considered the future of the business. It also involved huge capital expenditures to buy these homes. Now that Zillow is winding down the business, it can be more flexible with its capital and focus on its core business as a real estate platform -- where it shines.

Its main service is what it calls IMT (internet, media, and technology). That mostly covers its agent and advertising fees, with agent fees being its largest revenue generator. Its mortgage unit is a large part of the total as well.

Now what

In the third-quarter report, while demonstrating sustained progress, Zillow still posted a 12% drop in revenue over last year and a $51 million loss from continuing operations (excluding the shuttering of iBuying). However, Zillow beat Wall Street's expectations for earnings and came in above its guidance for revenue growth and adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA). The company sees EBITDA as a more useful measure of its operations than net income as it doesn't account for major changes in its business, such as the iBuying segment.

As a newly restructured company, investors are excited about Zillow's opportunities because it has tremendous potential within its remaining segments. An obvious edge is Zillow's popularity and name recognition, which are unbeatable in digital real estate. Though housing is depressed (like most of the economy), Zillow's app is the most widely used U.S. real estate app in an industry typically in an up market.

Now that iBuying is out, it will be easier to assess Zillow's progress on a year-over-year basis, and so far, it's looking strong. However, with continued losses and a weak housing market, it may be premature to buy Zillow stock.