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Zillow (ZG) Down 1.6% Since Last Earnings Report: Can It Rebound?

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A month has gone by since the last earnings report for Zillow Group (ZG - Free Report) . Shares have lost about 1.6% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is Zillow due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.

Zillow Group Beats Earnings and Revenue Estimates in Q1

Zillow Group reported relatively modest first-quarter 2023 results, beating the bottom-line and top-line estimates. Despite recording lower revenues year over year owing to a challenging macroeconomic environment, a favorable mix of first-time home buyers combined with solid engagements in its rental platforms remained tailwinds.

Net Income

GAAP net loss in the quarter was $22 million or a loss of 9 cents per share against a net income of $16 million or 6 cents per share in the prior-year quarter.  The wider loss was primarily due to top-line contraction and higher operating expenses.

On a non-GAAP basis, the company’s net income declined to $87 million or 35 cents per share from $121 million or 44 cents per share in the year-ago quarter. Non-GAAP net income for the reported quarter beat the Zacks Consensus Estimate by 20 cents.

Revenues

Revenues declined to $469 million from $536 million due to lower Residential and Mortgage revenues owing to a challenging macroeconomic environment. The top line, however, beat the Zacks Consensus Estimate of $422 million.

The Residential revenues declined 14% to $361 million due to soft housing market conditions. Rental revenues were up 21% to $74 million driven by growth in multifamily properties. Mortgage revenues were $26 million, down 43% due to higher interest rates that slowed refinance activities.

Other Details

During the quarter, Zillow Group recorded a gross profit of $377 million compared with $444 million in the prior-year quarter. The decline is primarily due to lower revenues. The operating expenses during the quarter were $422 million, up from $408 million in the prior-year quarter.  Adjusted EBITDA was $104 million compared with $166 million in the prior-year quarter.

Cash Flow & Liquidity

Zillow Group generated $93 million cash from operating activities compared with $3,392 million in the prior-year period. As of Mar 31, 2023, the company had $1,394 million in cash and cash equivalents with $133 million of lease liabilities, net of the current portion.

Outlook

For the second quarter of 2023, Zillow Group estimates total revenue to be in the range of $451-$479 million. Total adjusted EBITDA is expected to be in the range of $61 million to $81 million.

How Have Estimates Been Moving Since Then?

Estimates review followed a flat path over the past two months.

VGM Scores

Currently, Zillow has an average Growth Score of C, though it is lagging a lot on the Momentum Score front with an F. Charting a somewhat similar path, the stock was allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.

Overall, the stock has an aggregate VGM Score of D. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Zillow has a Zacks Rank #1 (Strong Buy). We expect an above average return from the stock in the next few months.

Performance of an Industry Player

Zillow is part of the Zacks Internet - Services industry. Over the past month, Alphabet Inc. (GOOG - Free Report) , a stock from the same industry, has gained 18.2%. The company reported its results for the quarter ended March 2023 more than a month ago.

Alphabet Inc. reported revenues of $58.07 billion in the last reported quarter, representing a year-over-year change of +3.7%. EPS of $1.17 for the same period compares with $1.23 a year ago.

Alphabet Inc. is expected to post earnings of $1.33 per share for the current quarter, representing a year-over-year change of +9.9%. Over the last 30 days, the Zacks Consensus Estimate has changed +0.2%.

Alphabet Inc. has a Zacks Rank #3 (Hold) based on the overall direction and magnitude of estimate revisions. Additionally, the stock has a VGM Score of A.


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