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Zillow Group (ZG) Declares Pricing of $400M Senior Notes
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Zillow Group, Inc. (ZG - Free Report) announced the pricing of convertible senior secured notes worth U.S. $400 million. These notes are due to mature by 2021.
The senior notes carry an interest rate of 2%. The offering is slated to close on Dec 12, 2016, subject to certain customary conditions. The company estimates net proceeds of around U.S. $389.4 million, after removing purchase discounts and offering costs.
Initial buyers will have a 30-day option to buy all or additional notes worth $60 million aggregate principal amount of notes on the same terms and conditions to cover over-allotments, if any. We believe these notes will provide the company financial flexibility to drive long-term growth.
Zillow Group plans to utilize the net proceeds from the offering for general corporate purposes, which may include repurchases of outstanding convertible senior notes of its wholly owned subsidiary, Trulia, LLC, (bearing a rate of 2.75%) due in 2020. Also, the proceeds from the offering will be used to finance its acquisitions related expenses and repay a part of the company’s outstanding debt.
Shares of Zillow have been steadily trending higher on a year-to-date basis. The stock has returned 46.39% compared with the Zacks categorized Internet Services industry’s loss of 0.18%.
Zillow offers mobile and web solutions that enable users to find important information about homes. The company reported better-than-expected third-quarter fiscal 2016 results on Nov 2, beating the Zacks Consensus Estimate on both counts.
The company posted third-quarter adjusted earnings of 3 cents per share as against the Zacks Consensus Estimate of a loss of 2 cents. Also, Zillow Group’s third-quarter revenues of $225 million not only increased 35% year over year, it surpassed the Zacks Consensus Estimate of $220 million.
Zillow Group exited the quarter with cash and cash equivalents and short-term investments of $444.6 million. Long-term debt on the balance sheet totaled $230 million.
Cash flow used by operating activities during the nine months ended Sep 30, 2016 was $30.4 million.
In the stringent regulatory landscape, this offering is expected to further enhance the company’s balance sheet as well as support its future growth. Additionally, the senior notes offering will bring down the company’s cost of capital, in our view, thus strengthening the balance sheet and supporting growth.
Last Words
We believe that strong traffic growth, frequent product launches and the growing Agent business are positives. In particular, product launches like Zillow Real Estate and Zillow Digs App for Apple Inc.'s (AAPL - Free Report) iPhone and iPad are expected to drive growth.
Moreover, the Trulia acquisition will not only make Zillow the number one online real estate information provider in the U.S., but also help it to compete against Move Inc., which has now been acquired by News Corp.
Zillow also entered into several partnerships with real estate listing companies and real estate brokers to enhance its product portfolio. However, the company is currently in the high investment phase and therefore profitability might be an issue in the to-be reported quarter.
Cirrus Logic and NetApp have a long-term earnings per share growth rate of 17.5% and 11.2%, respectively.
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Zillow Group (ZG) Declares Pricing of $400M Senior Notes
Zillow Group, Inc. (ZG - Free Report) announced the pricing of convertible senior secured notes worth U.S. $400 million. These notes are due to mature by 2021.
The senior notes carry an interest rate of 2%. The offering is slated to close on Dec 12, 2016, subject to certain customary conditions. The company estimates net proceeds of around U.S. $389.4 million, after removing purchase discounts and offering costs.
Initial buyers will have a 30-day option to buy all or additional notes worth $60 million aggregate principal amount of notes on the same terms and conditions to cover over-allotments, if any. We believe these notes will provide the company financial flexibility to drive long-term growth.
Zillow Group plans to utilize the net proceeds from the offering for general corporate purposes, which may include repurchases of outstanding convertible senior notes of its wholly owned subsidiary, Trulia, LLC, (bearing a rate of 2.75%) due in 2020. Also, the proceeds from the offering will be used to finance its acquisitions related expenses and repay a part of the company’s outstanding debt.
Shares of Zillow have been steadily trending higher on a year-to-date basis. The stock has returned 46.39% compared with the Zacks categorized Internet Services industry’s loss of 0.18%.
Zillow offers mobile and web solutions that enable users to find important information about homes. The company reported better-than-expected third-quarter fiscal 2016 results on Nov 2, beating the Zacks Consensus Estimate on both counts.
The company posted third-quarter adjusted earnings of 3 cents per share as against the Zacks Consensus Estimate of a loss of 2 cents. Also, Zillow Group’s third-quarter revenues of $225 million not only increased 35% year over year, it surpassed the Zacks Consensus Estimate of $220 million.
Zillow Group exited the quarter with cash and cash equivalents and short-term investments of $444.6 million. Long-term debt on the balance sheet totaled $230 million.
Cash flow used by operating activities during the nine months ended Sep 30, 2016 was $30.4 million.
In the stringent regulatory landscape, this offering is expected to further enhance the company’s balance sheet as well as support its future growth. Additionally, the senior notes offering will bring down the company’s cost of capital, in our view, thus strengthening the balance sheet and supporting growth.
Last Words
We believe that strong traffic growth, frequent product launches and the growing Agent business are positives. In particular, product launches like Zillow Real Estate and Zillow Digs App for Apple Inc.'s (AAPL - Free Report) iPhone and iPad are expected to drive growth.
Moreover, the Trulia acquisition will not only make Zillow the number one online real estate information provider in the U.S., but also help it to compete against Move Inc., which has now been acquired by News Corp.
Zillow also entered into several partnerships with real estate listing companies and real estate brokers to enhance its product portfolio. However, the company is currently in the high investment phase and therefore profitability might be an issue in the to-be reported quarter.
Zillow currently carries a Zacks Rank #2 (Buy). Stocks worth considering include Cirrus Logic, Inc. (CRUS - Free Report) and NetApp Inc. (NTAP - Free Report) , sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here
Cirrus Logic and NetApp have a long-term earnings per share growth rate of 17.5% and 11.2%, respectively.
Zacks’ Best Private Investment Ideas
In addition to the recommendations that are available to the public on our website, how would you like to follow all Zacks' private buys and sells in real time?
Our experts cover all kinds of trades… from value to momentum . . . from stocks under $10 to ETF and option moves . . . from stocks that corporate insiders are buying up to companies that are about to report positive earnings surprises. You can even look inside exclusive portfolios that are normally closed to new investors. Starting today, for the next month, you can have unrestricted access. Click here for Zacks' private trades >>