Investors have made it abundantly clear that they aren't impressed with what Zillow has to offer them. The US property portal's stock is sitting still at almost 50% below its last year's record.
The problem for ZG stock is that the narrative has changed. Investors thought they were getting another capital-light Internet platform, one with high margins and impressive growth. Zillow had the potential to not necessarily transform the real estate sector, but by selling advertising and leads to realtors, at least carve out a nice share of that massive industry.
For Zillow management, however, that doesn’t seem to be enough. As InvestorPlace’s Dana Blankenhorn detailed earlier this year, ZG stock has become a bet on house-flipping. Zillow is moving into mortgages as well. For investors who lived through the financial crisis of the last decade, “innovation” in the real estate market is a reason for caution, not optimism. And that is one of the reasons why Zillow stock has struggled of late.
That said, it’s not at all guaranteed that Zillow management is wrong. Indeed, if they’re right, the rewards here are enormous, as Zillow gains a bigger portion of the lucrative real estate market. First quarter earnings give Zillow management another chance to show why its strategy makes sense.
The Q4 report in February stated that the earnings report was key for ZG stock. That turned out to be both true and false. ZG stock gained 25% on the report, in part due to the news that Founder Rich Barton was returning to the CEO post.
But those gains would fade. Within six weeks, ZG shares were back to pre-earnings levels — and they kept falling. A recent rally leaves ZG stock about where it was before the fourth quarter report.
That’s true from a price standpoint and from a ‘feel’ standpoint as well. In both senses, Zillow stock is right back where it was almost three months ago. And that presents an opportunity with the first quarter release.
Read more here