Zillow Inc.
(
Z
) recorded a massive 500% positive earnings surprise in its second
quarter, marking its fourth consecutive earnings beat. The surprise
was mainly due to a strong performance for Zillow Mortgage
Marketplace. With a long-term earnings growth projection of 40%,
this Zacks #1 Rank (Strong Buy) real estate information marketplace
operator offers solid growth opportunities.
Second Quarter Results
On August 7, Zillow reported second quarter net income of 4 cents
per share, compared with the Zacks Consensus Estimate at a loss of
1 cent. The company broke even in the year ago quarter.
Revenue jumped 75% year over year to $27.8 million, driven by a
102% surge in Marketplace revenue and a 33% increase in Display
revenue.
Zillow has already established its footprint in the residential
real estate and mortgages business, and is now building strength in
the rentals marketplace. In early June, Zillow acquired San
Francisco-based RentJuice, a provider of rental relationship
management software, for $40 million in cash.
Total costs and expenses escalated 85% to $26.5 million largely due
to the 116% jump in sales and marketing expenses.
Zillow experienced record usage across mobile and web in the second
quarter with average monthly unique users growing 61%.
On September 5, Zillow announced an offering of approximately 3.2
million shares of its Class A common stock. The proceeds will be
deployed to meet working capital needs, sales and marketing
activities, general and administrative expenses and capital
expenditures.
Guidance
Zillow expects to generate revenue between $30.0 and $31.0 million
in the third quarter of 2012. This represents a year-over-year
increase of 60%.
Adjusted EBITDA is expected between $4.75 million and $5.25 million
for the third quarter.
Positive Estimate Revisions
For 2012, the Zacks Consensus Estimate is currently pegged at 12
cents, up nearly 71.4% over the last 60 days. This suggests a
year-over-year increase of 67.9%.
Likewise, for 2013, the Zacks Consensus Estimate of 47 cents
improved 46.9% over the same time frame, representing a possible
year-over-year increase of 300%.
Stretched Valuation
Shares of Zillow are roughly trading at 13.9x on a price-to-sales
basis, significantly ahead of the peer group average of 1.8x. On a
price-to-book (P/B) basis, shares are trading at 11.0x compared
with the peer group average of 2.2x.
Zillow has a trailing 12-month ROE of 4.9% compared with the peer
group average of 5.1%. However, given the strong fundamentals, the
premium valuation looks justified.
Ever since the second quarter earnings release on August 7, the
stock price has grown 2.1%. The chart below shows Zillow's strong
earnings momentum.
Headquartered in Seattle, Washington and founded in 2004, Zillow is
a leading provider of real estate information marketplace and
mortgages through its mobile applications and websites in the
Unites States. With a market capitalization of $1.25 billion and
engaging 443 employees, Zillow competes closely with Market Leader,
Inc. (
LEDR
) and Zaio Corp. (
ZAOFF
), among others.
ZILLOW INC (Z): Free Stock Analysis Report
ZILLOW INC (Z): Free Stock Analysis Report
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