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Analyst Blog

Zillow Inc. (Z - Snapshot Report) reported third-quarter 2013 net loss of 11 cents per share, narrower than the Zacks Consensus Estimate of a loss of 18 cents per share. However, results were highly unfavorable when compared to year-ago net earnings of 7 cents per share.

Substantial increase in expenses mainly led to the downside. However, share price moved up 1.3% to close at $82.31 yesterday given that the company reported a lower-than-expected loss.

Including a one-time tax benefit of $4.3 million related to StreetEasy acquisition, net loss came in at 3 cents per share, comparing unfavorably with 7 cents earned in the year-ago quarter.

Quarterly Operational Update

The top line emerged with a higher-than-expected improvement in the quarter. Total revenues increased 67% year over year to $53.3 million. This was driven by solid improvement in marketplace revenues (up 73%) and display revenues (up 50%). Total revenues also surpassed the Zacks Consensus Estimate of $52 million.

Total expenses surged 99% year over year to $58.8 million due to higher cost of revenue, sales and marketing expenses, technology and development and general and administrative expenses.

The higher expenses more than offset the increase in total revenues, thus inducing operating loss in the quarter.

Average unique monthly users increased 69% year over year to 61.1 million. Premier Agent subscribers also increased 68% year over year to 44.7 million as on Sep 30, 2013. Average monthly revenue per subscriber was $264, fueled by record subscriber growth.

Earnings before interest tax, depreciation and amortization (EBITDA) of $4.1 million in the reported quarter dropped 46% year over year. The decline was largely attributable to previously announced investments in advertising.

Financial Position

As of Sep 30, 2013, Zillow had cash and cash equivalents of $318.9 million, up substantially from $150 million as of Dec 31, 2012.

As of Sep 30, 2013, total assets of the company were $591.7 million, increasing from $304.2 million as of Dec 31, 2012.

Shareholders’ equity of Zillow as of Sep 30, 2013 was $557 million, up from $280.3 million as of Dec 31, 2012.

Net cash flow from operating activities in the first nine months of 2013 was $12.5 million, down from $22.5 million in the year-ago period.

Business Update

Zillow closed the acquisition of StreetEasy in August in an all-cash transaction of $50 million. The acquisition provides a competitive edge to Zillow in the largest and most important real estate market.

In September, Zillow completely redesigned the Zillow Real Estate App for iPhone(R) and iPad(R) to launch them alongside Apple's new operating system, iOS7.

In October, Zillow launched the Zillow Digs(TM) App for iPhone.

Performance of Other Online Services Companies

Yandex N.V. (YNDX - Snapshot Report) posted net income of 46 cents per share in the third quarter, beating the Zacks Consensus Estimate of 25 cents and year-ago earnings of 21 cents.

Brightcove Inc. (BCOV - Snapshot Report) reported a loss of 1 cent per share in the third quarter of 2013, narrower than the Zacks Consensus Estimate of a loss of 11 cents and year-ago loss of 11 cents.

TripAdvisor Inc. (TRIP - Analyst Report) reported adjusted third-quarter 2013 earnings of 39 cents per share, a penny lower than the Zacks Consensus Estimate and 3 cents down from the year-ago figure.

Zacks Rank

Zillow currently carries a Zacks Rank #3 (Hold).

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