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Zillow (ZG) Beats Estimates in Q4 Earnings, Guides Well

Shares of Zillow Group Inc. ZG fell 7.6% on Wednesday following the company's fourth-quarter earnings the day before despite reporting a bottomline beat.

The company reported earnings (excluding stock-based compensation) of 14 cents per share in the fourth-quarter of 2016, which was considerably better than the loss of a penny reported in the year-ago quarter.

Notably, Zillow's shares have outperformed the Zacks Internet - Services industry over the last one year. While the industry gained 17.8%, Zillow is up 80.8%.

Including stock based compensation the company reported loss of a penny, which was better than the the Zacks Consensus Estimate of a loss of 3 cents.

The improved result reflects growing adoption of the company's services.

Notably, total revenue increased 34.4% year over year to $227.6 million, beating the Zacks Consensus Estimate of $223 million quite comfortably.

Zillow Group, Inc. Price, Consensus and EPS Surprise

Zillow Group, Inc. Price, Consensus and EPS Surprise | Zillow Group, Inc. Quote

Quarter in Details

Zillow has two reportable segments namely, Marketplace (which includesPremier Agent, other real estate and mortgages) and Display.

In the fourth quarter, Marketplace revenues of $210.6 million increased 42.1% on a year-over- year basis. The biggest revenue contributor in this business segment was Premier Agent (72.2%), which grew 32.1% on a year-over-year basis to $164.3 million.

The growth was primarily driven by an increase in the number of agents and subsequent acceleration in their spending on Zillow's mobile apps and websites that continued to drive engagement.

Other real estate contributed $29.8 million in revenues that witnessed a whopping 144.9% growth from the year-ago quarter propelled by good demand for the company's brands such as StreetEasy, Zillow, Trulia, Naked Apartments, Hot Pads and HERO.

Mortgages contributed revenues of $16.5 million that grew 41.3% when compared to the year ago quarter, primarily due to a significant growth in mortgages.

On the other hand, Display revenues of $16.9 million declined 19.6% on a year-over-year basis.

Reported sales and marketing expenses as a percentage of revenues contracted 640 basis points (bps). Technology and development expenses as a percentage of revenues contracted130 bps. On the other hand, general and administrative expenses as a percentage of revenues decreased 840 bps.

Zillow exited the fourth quarter with cash and cash equivalent balance of $243.6 million, up $14.4 million on a year-over-year basis.

Guidance

Management expects first-quarter 2017 total revenue to remain in a range of $232 million to $237 million. The Zacks Consensus Estimate was pegged at $235.9 million.

The company expects Premier Agent revenues of $170 million to $172 million, other real estate revenues of $31 million to $32 million, and mortgage revenues of $17 million to $18 million, which taken together comprise Marketplace revenues.

On the other hand, the company's Display revenues are projected in a range of $14 million to $15 million.

Operating expenses are expected to remain in a range of $247 million to $252 million. Net loss is expected in a range of $14.1 million to $19.1 million.

Our Take

Zillow posted a strong fourth-quarter beating both estimates on both the topline and the bottomline. The company implemented all of its strategic priorities and launched the self-service account interface meant for Premier Agents on a national level.

The strong performance indicates growing demand for the company's Marketplace business model, which augurs well for the company in the long term.

Zacks Rank

Zillow has Zacks Rank #4 (Sell).

Some better-ranked stocks in the broader technology space include Applied Optoelectronics AAOI , and Bridgeline Digital Inc. BLIN each sporting a Zacks Rank #1 (Strong Buy) and HealthStream Inc. HSTM carrying a Zacks Rank #2 (Buy). You can see the complete list of today's Zacks #1 Rank stocks here.

Notably, the consensus estimate for Applied Optoelectronics' current year has improved to 94 cents from 80 cents over the last 30 days.

Similarly, the consensus estimate for Bridgeline Digital's current year has narrowed down to a loss of 9 cents from loss of 10 cents over the last 60 days.

Last but not the least, the consensus estimate for HealthStream's current year has remained stable at 21 cents over the last 90 days.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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