) Just reported a gerat quarter, raised revenue guidance and noted
that more than half of its traffic is coming from mobile. As a
Zacks Rank #2 (Buy), it is the Bull of the Day.
There is no doubt that the market is placing a premium on companies
that are more mobile based, as usage of smartphones and tablets has
exploded. On the most recent earnings call the company noted they
are getting 55% of traffic from mobile devices and even more on the
The company also released a very telling stat. 93 homes were viewed
each second on mobile devices during 1Q13. That is an increase of
63% from the year ago period. During 4Q12, that stat was 53 homes
per second which represented a year over year growth rate of 47%.
So the pace of growth is increasing.
Another segment that saw growth was the mortgage marketplace
revenue from mobile. The last time this percentage was released was
3Q12 and it was 20%. The most recent quarter saw 31% of revenues
being generated from mobile for the mortgage marketplace.
Zillow operates of a real estate and home-related information
marketplace on mobile and the Web. It covers 110 million homes and
provides a "Zestimate" or a Zillow provided estimate for homes,
townhomes and condominiums. The company has also expanded into the
Z Beats Estimates In Three of Last Four Quarters
Dating back to the June 2012 quarter, Zillow has beaten the Zacks
Consensus Estimate in three of the last four quarters. The June
2012 quarter saw the company post $0.04, $0.05 ahead of the
estimate for a 500% positive earnings surprise. The following
quarter saw a six cent beat which translated into a 600% positive
The most recent quarterly report took place on May seventh of this
year. The company posted revenues of $39M and EPS of - $0.11, a
$0.01 miss on the bottom line, but a $3M beat on the topline.
Guiding Revenues Higher
In the earnings release and on the conference call, management
noted that they were raising revenue guidance from $165M-$170M to
$178M-$182M while consensus was just over $172M. The increase was
due to an increase in advertising expense which drove more traffic
to the website in the quarter. The downside of increased
advertising expense is the hit to the bottom line.
During the quarter 46.6M unique users came to the site, up 46.7%
from 31.7M users in the year ago period and up from 34.5M in the
previous quarter. The result of the increased traffic was higher
display advertising revenues. The company reported $7.9M in display
revenue, up 27.4% from the year ago period and also posted a
sequential increase from the $7.5M from 4Q12.
Conference Call Features Questions Tweeted In
History was made when Zillow reported its most recent quarter. For
the first time a public company took questions via Twitter, huge
win for investors that want more transparency. The real time nature
of Twitter allowed CEO Spencer Rascoff to address the idea of
underwater mortgage quote requests. Unlike other calls that have
tried emailed questions, this approach allowed the casual observer
to see all the different questions and thought processes used in
the analysis of the stock / conference call / information.
While there have been a few stories on the matter, many have missed
the idea of the real time nature of the Q&A. Often times an
analyst may ask a three part question, but really have 6 queries.
In this format, anyone can put forth what is on their mind. Of
course the downside to that is when someone is asking when the CFO
might post something to his Google+ account (like say, this article
for example). The other potential downfall is the company selecting
only the topics they want to discuss.
The valuation picture for Z shows what you would expect to see for
a fast growing company with great potential for future earnings.
That is code for a high valuation, as the company is sporting a
multiple thousand trailing multiple of earnings compared to a 20x
industry average. The price to book multiple of 6.7x is higher than
the industry average of 4.5x and the price to sales is just under
triple the industry average. Those high metrics and multiples do,
however, come with a healthy dose of growth. Analysts expect
revenue growth of 52% in 2013 versus 10.4% for the industry and
39.4% for 2014 compared to 9.1% for the industry.
When you see the chart of over the last six months you will see a
45 degree angle, which is just what most investors want to see. A
big driver behind that push higher has been consistent
institutional purchases, the least of which coming from Caledonia
Investment Management out of Australia. I would note that any pull
back over the last six months represented an excellent buying
Full disclosure: At time of publication, the author of this article
owned shares of Zillow.
Brian Bolan is a Stock Strategist for Zacks.com. He is the Editor
in charge of the
Run Investor service
, a Buy and Hold service where he recommends the stocks in the
Brian is also the editor of
a trading service that focuses on small cap stocks and also carries
a risk limiting strategy.
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