Is Zillow a buy?

It’s time to breakdown a real estate technology name. Here is the breakdown on $Z, otherwise known as Zillow.


Current Price: $189.76

52/Wk High: $208.11

52/Wk Low: $20.04


Market Cap: $32.6 Billion


Read below for the breakdown!


Zillow ($Z) is a major digital on-demand real estate platform that allows customers to find, sell, buy, and rent homes across the country.


Throughout the COVID-19 pandemic, industries have been turning digital, including the real estate market. Given increasing digital trends, investors have turned to Zillow curious as to whether the stock is a buy.


Taking a look at the stock’s recent performance, Zillow has rallied over 265% in just the past year supported by strong earnings results.


In fact, throughout 2020 Zillow has seen a strong jump in visits, taking total 2020 visits to 9.6 billion, 19% higher than the total visits from 2019.


Digging into the numbers, Zillow beat Q4 2020 expectations with an EPS of $0.41, much better than the expected $0.27. On a year over year basis, EPS improved 257%.



On the downside, Zillow reported a decline in revenues, with Q4 revenues totaling $789 million, representing an unfortunate 16.42% decline on a year over year basis.

Although revenues did fall on a year over year basis, segment revenues landed on the upper end of guidance, with IMT segment revenues growing 33% to a strong $424 million.



Not only that, but Homes segment revenues returned to the prior Q4 2019 revenues levels, totaling $304 million. Lastly, the mortgages segment turned out $61 million in revenues, representing a 190% increase in the segment’s revenues on a year over year basis.


As for net income, Zillow reported a Q4 GAAP net income of $46 million and an adjusted EBITDA of $170 million.


Rounding out 2020 Zillow revenues grew on a full-year basis by 22%, totaling $3.3 billion. All the while, net income on a GAAP basis totaled $-162 million for the full year.


Lastly, Zillows traffic increased to record highs throughout Q4, with Zillows Mobile apps and websites reaching 201 million monthly unique users, representing a 16% increase on a year over year basis.


Shifting into the balance sheet, the numbers are solid.


Total Debt: $2.284 Billion


Total Liabilities: $2.745 Billion


Total Assets: $7.487 Billion


Cash & Short Term Inv: $3.921 Billion


On a valuation basis, Zillow does trade at a premium.


Forward Price to Earnings: 138.51x


Price to Sales: 14.48x


Price to Book: 10.34x


Price to Cash Flow: 162.77x


As for management, leadership has done a solid job but could be more effective in the future.


Return on Equity: -3.97%


Return on Assets: -2.38%


Return on Invested Capital: -2.75%


Given the numbers, the analysts are neutral with a mean price target of $177.75/share, representing a -6.33% downside.


It is also important to note that the high price target is $200.00/share, representing a 5.40% gain, while the low price target is $161.00/share, representing a -15.16% downside.


The big money is quite involved as well, with 94.96% of Zillow being owned by institutions. Top holders include Caledonia Investments, The Vanguard Group, and Ark Investment Management.


On a technical basis, Zillow has been bullish. According to the six-month charts, the MACD is moving to the upside with strong momentum within a range of 14.78 down to 9.78.


The six-month charts are also indicating an RSI of 70.41 and CCI of 130.2, both of which are on the high end.



In short, Zillow is a solid long-term investment, given recovering revenues, solid user growth, a booming real estate industry, and a digital trend that looks as if it is just getting started.


EAT - SLEEP - PROFIT


Disclaimer: This is not direct financial advice, simply an opinion based on independent research.