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On Mar 18, 2013, shares of Zillow Inc. (Z - Snapshot Report) hit a 52-week high of $55.09. The company reported fourth-quarter results with a positive earnings surprise of 133.33%. Zillow delivered positive earnings surprise in all 4 quarters of 2012 with an average beat of 411.11%.

On Feb 13, 2013, Zillow reported its fourth-quarter net earnings of 2 cents, which exceeded the Zacks Consensus Estimate of a loss of 6 cents. Results were down 33.3% year over year from 3 cents earned in the year-ago quarter.  
 
During the fourth quarter Zillow’s top line grew 73% to $34.3 million on a year-over-year basis.  It surpassed the Zacks Consensus Estimate by 10.6%. Results were driven by improvement in marketplace revenue and display revenue.

Zillow has been continuously working toward improving its revenue structure through increasing its clientele. In order to achieve this goal, the company is pursuing strategic acquisitions and is offering new and better products to its customers.

In Oct 2012, Zillow introduced a new website, Zillow Rentals, to enhance the rental business on mobile and Web. Again, in Feb 2013, it launched Zillow Digs– an online service in home remodeling, which marked an expansion in its existing lines of businesses.

In 2012, Zillow acquired four companies– RentJuice, HotPads, Mortech Inc. and Buyfolio– to boost its organic growth story.

Further, in Feb 2013, the company declared that Zillow Real Estate Network will be partnering HGTV to provide all real estate listings for HGTV’s Front Door, the cable channel’s home-related media content website. Zillow Premier Agent website which is expected to come into force in the second quarter of 2013 will also be benefited from the partnership.

During its fourth-quarter earnings release, Zillow guided its 2013 revenue to be in the range of $165–$170 million. The liaisons, launch of advanced services and acquisitions are expected to help Zillow achieve its expectation and improve its top line going forward.

However, valuation looks stretched for Zillow. The shares are trading at a considerable premium to the peer group average on a forward price-to-earnings basis and at a 36.6% premium to the peer group average on a price-to-book basis.

The return on equity is 3.3% above the peer group average. Nevertheless, the 1-year return from the stock is 63.63%, much above NASDAQ’s return of 5.96%.   

Going forward, Zillow’s focus on maintaining aggressive expansion of its mobile and desktop user base, enhancing its Premier Agent business as well as improving mortgages, rentals and home improvement to cement its position in emerging markets are expected to be beneficial.

We believe that the strong emphasis on revenue improvement will bolster future earnings. The overall long-term expected earnings growth rate for this stock is 30.0%.

Zillow currently carries a Zacks Rank #3 (Hold). Among others from the industry, Changyou.com (CYOU - Snapshot Report), China Distance Education (DL - Snapshot Report) and Perion Network (PERI) carry a favorable Zacks Rank #2 (Buy) and are worth noting.

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