Zillow's Stock Surge Explained

Shares of Zillow (Z 23.77%) (ZG 24.98%) experienced a significant increase today following the announcement of exceptional third-quarter results. The stock price rose by 23.8%, reflecting investors' positive response to the company's performance.

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Zillow's Impressive Financial Performance

Zillow reported a total revenue of $581 million for the third quarter, an impressive 17% increase compared to the previous year. This result exceeded both the midpoint of the company’s guidance at $553 million and the analysts' consensus estimate of $554.7 million.

The growth in revenue comes from a diverse range of sources. Specifically, the residential revenue climbed by 12% to $405 million, indicating that more buyers and sellers are utilizing Zillow’s agent partners. Additionally, rental revenue saw a surge of 24%, reaching $123 million, while mortgage revenue soared by 63% to $39 million.

To enhance customer experience, Zillow has been investing in new technology, including artificial intelligence (AI)-driven natural search features. The company's strategy to improve market offerings through an integrated transaction model is showing promising results across various metropolitan areas.

In terms of profits, Zillow reported adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) of $127 million, which significantly surpassed their guidance. However, the net loss under generally accepted accounting principles (GAAP) was $20 million, translating to a loss of $0.08 per share.

CEO Jeremy Wacksman characterized the results as another strong quarter, stating, "We continue to invest in tech solutions to build the integrated transaction experience consumers demand and deserve."

Future Outlook for Zillow

As a leading online real estate platform, Zillow is on track to establish a sustainable business model that leverages its market position. For the fourth quarter, the company anticipates total revenue between $525 million and $540 million, aligning closely with market estimates. They also expect adjusted EBITDA to range from $90 million to $105 million.

The 17% revenue growth in the last quarter indicates a solid performance while improving EBITDA margins suggest effective cost management. Should the housing market recover, Zillow may see even greater gains ahead.

Jeremy Bowman has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Zillow Group. The Motley Fool has a disclosure policy.

Zillow, Stock, Earnings