Secure your shutters, Zillow Group (NASDAQ:ZG) investors. Your favorite online real estate specialist is set to announce first-quarter 2015 results later this week, so it's time to start thinking about what to expect.
Analysts, on average, think Zillow's revenue will more than double over the same year-ago period to $137.5 million, which should translate to an adjusted net loss of $0.11 per share.
But to really understand what's driving those results, investors need to take a deeper tour through Zillow's financial house. Here are three things I'll be watching when Zillow's report hits the wires.
Details on Zillow's "massive" rental opportunity
First, when Zillow completed its acquisition of Trulia (UNKNOWN:TRLA.DL) in February, CEO Spencer Rascoff specifically called the move a "game changer" thanks to the "massive scale" Trulia's rental lead volume brings to the table.
Incidentally, Zillow followed up on Monday morning to announce it has increased new Zillow Rental Network partnerships by 84% year over year. What's more, Zillow says "nearly 90%" of the 50 largest apartment managers in the National Multifamily Housing Coucil are now Zillow Rental network customers.
One of those customers, Bell Partners VP Kevin Thompson, even noted, "On cost-per-lead basis, Zillow Rental Network beat all other Internet listing services and our own website results."
That's all well and good, but investors are obviously wondering how and when this scale will convert to financial success. I'll be listening closely, then, for more specific financial details on the revenue opportunity presented by Zillow's freshly bolstered rental platform.
Continued progress in MLS Direct
Next, I want to know whether Zillow is maintaining the previous momentum of its MLS direct initiative -- that is, its efforts to secure agreements with multiple listing services to send listings directly to its sites.
Last month, Zillow told investors it has signed "hundreds" of deals with MLSes since January and consequently has more direct listings on its site now than if its previous MLS contract with News Corp.'s List Hub hadn't expired on April 7. According to Rascoff, this puts Zillow Group "in a much stronger position strategically, as we are no longer dependent on a competitor for listings."
But you can also bet Zillow is doing everything possible to run up the score. Three weeks ago, for example, it unveiled Zillow Group Data Connect, through which its MLS partners will now have access to public real estate record data (enhanced with supplementary data from Zillow, of course) with broad usage rights at no cost. Previously, MLSes could spend hundreds of thousands of dollars annually to buy or license this data, and even then received updates only periodically.
By adding value through services like this to sweeten the pot, I won't be the least bit surprised if Zillow describes continued momentum in its MLS direct initiative in this quarter's call.
Formal guidance for Zillow's "Transition Year"
Finally, remember that Zillow stock fell last month when Rascoff labeled 2015 as a "transition year," and then offered disappointing guidance for 2015 pro forma revenue of $690 million. That was well below analysts' expectations at the time for 2015 revenue of $753 million. To blame, Rascoff said, was the longer-than-expected FTC approval process for the Trulia acquisition, put Zillow "a couple quarters behind where we'd like to be."
At the same time, Rascoff said the integration is progressing well, and promised more details when the company issues formal guidance -- something they opted not to do last quarter -- in this week's conference call. For reference, Wall Street is anticipating full-year 2015 earnings of $0.11 per share on revenue of $681.8 million.
To be fair, Rascoff also insisted that this transition should leave Zillow poised for much-improved performance in 2016 and 2017. In the end, that bodes particularly well for patient, long-term investors. But until our short-term-oriented market sees a light at the end of the tunnel, the price of Zillow stock might well remain depressed.