Zillow CEO cites ‘humorous and racy’ SNL skit as an indication that the ‘the Nice Reshuffling’ is taking maintain
Zillow Group Inc. was able to significantly exceed high expectations for fourth quarter results, prompting investors to push the stock to another record high in double digits, as well as a multitude of Wall Street analysts to improve their price targets.
The real estate information and transactions website reported adjusted earnings and revenues late Wednesday of the fourth quarter that were well above consensus analysts’ expectations. Speaking on the post-earnings conference call with analysts, the CFO said first quarter revenue is expected to be approximately $ 1.1 billion, compared with expectations of approximately $ 889 million at the end of January.
ZG stock, up 1.17%, rose 16.8% on Thursday to $ 200.60 according to the earnings report, the fifth record close in the last six sessions.
“Surfing in Zillow has taken pop culture to a whole new level, as Saturday Night Live made a fun and racy sketch of it last weekend, headed by Dan Levy.”
The big post-earnings rally comes despite the stock’s 23.8% gain over the month through Wednesday. But Zillow has made a habit of hitting big hits as the stock rose an average of 12.8% prior to Thursday’s rally on the day after the last five quarterly results were released.
On Friday, the stock rose 1.2% to another record high. In the past 12 months, the company nearly quadrupled (up 293.1%) to grow its market cap to $ 47.2 billion, while the S&P 500 Index SPX gained 16.6% over the same period.
Big reason for investor excitement?
“We believe the Zillow offerings business – and iBuying by and large – is reaching an important turning point,” Deutsche Bank analyst Lloyd Walmsley wrote in a statement to customers.
He said the cost of selling on Zillow Offers is now comparable to that of a traditional real estate agent, but for a lot more value.
“Stop and think about it for a second. Why would someone with a more “commercial” home use the traditional home selling process instead of receiving cash from Zillow? “Walmsley wrote. “Zillow could be on the verge of becoming a real residential real estate marketplace.”
He reiterated his Buy recommendation on the stock, but raised his price target from $ 202 to $ 225 just three days after raising his target from $ 160 to $ 202.
Rich Barton, chief executive of Zillow, said on the conference call with analysts after the win that “Zillow browsing” gave results a boost as engagement for our mobile apps and websites reached levels in 2020 that “we would not have thought possible so far”.
“Zillow surfing has taken pop culture to a whole new level as ‘Saturday Night Live’ created a fun and racy sketch about it last weekend, headed by guest host Dan Levy,” Barton told FactSet transcript.
Another surge in traffic is due to the new cultural trend, what Barton called “Great Reshuffling,” which was sparked, if not accelerated, by the changes in the workplace resulting from the COVID-19 pandemic.
“Fantasies about real estate are not new,” said Barton. “What has changed is that more of these people are now free to move around. Many Americans who are not tied to their commuters and offices have begun reassessing how and where they want to live. “
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Wedbush analyst Ygal Arounian raised his target price from $ 167 to $ 218, repeating the outperformance he’s had on the stock since Jan. 6.
“The quarter was important evidence that Zillow’s transition to a larger role in the transactional elements of the real estate transaction is gradually coming together,” Arounian wrote. “But we think Zillow barely scratches the surface.”
Shyam Patil, an analyst at Susquehanna, kept his rating neutral, citing valuation concerns over the recent surge in stock prices, but raised his target from $ 130 to $ 200.
“Zillow continues to benefit from the booming real estate market and its strong positioning in the online lead and home businesses, as demonstrated again in the fourth quarter, and is strong across the company,” wrote Patil.
Overall, no fewer than 18 of the 24 analysts surveyed by FactSet have raised their price targets after the results of the fourth quarter. The average target price is now at $ 205.60, an increase of 44.5% from $ 142.30 at the end of January.
And CEO Barton said Zillow economists are calling for an even stronger real estate market in 2021, as they forecast 21% growth to nearly 6.8 million home sales and a double-digit percentage increase in house prices. He believes these higher prices will help address low inventory concerns by bringing more inventory to market, much like the just-in-time inventory management used by warehouse operators.
“The millennial generation is entering the early years of home buying and mortgage rates are historically low,” said Barton. “In addition to these macro factors, over the past year members of all generations have considered where to live with a new lens of flexibility and opportunity as the big makeover continues.”