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Home / Business / Zillow relies on turning houses, and investors seem to like it

Zillow relies on turning houses, and investors seem to like it

Zillow Group Inc. believes that "covered" consumers immediately want to buy and sell real estate through their mobile phone, making them more likely to buy real estate despite the risky forecasts.

Thursday Zillow

ZG, + 0.46%

said in the fourth quarter results that it would invest more in its Zillow Offers service, allowing consumers to easily sell their homes to the Seattle-based company can sell. Zillow, whose shares have lost nearly half of its value since the launch of the service in the second quarter of 201

8, also announced a shift in jobs among the three co-founders, and CEO Spencer Rascoff has resigned from co-founder Rich Barton.

Zillow's shares initially fell on the news after news, but after management predicted that Zillow Offers could add "$ 20 billion in annual income over the next three to five years" to a conference call with investors, it rebounded Shares and jumped 6%. On Thursday, its stock closed at $ 35.04, down 46% from its peak of 2018 from $ 65.57 in July 2018.

Zillow compared his big strategy change to streaming video embraced by Netflix as streaming years ago its potential would surpass DVD rental in sales. Another comparison that could be made is that real estate like content in some markets can be very expensive.

"I see many parallels here as we move the Zillow group to what we saw at Netflix as the next phase. Moving DVDs to streaming and then to originals," Barton told analysts in the conference call , "It's that kind of change." Barton was at Netflix Inc.

NFLX, -0.82%

since 2002. At the end of the call, he made another Netflix analogy. Can you imagine that Netflix simply ignored the streaming? You can probably say that I'm upset. I hope you are too. "

Zillow Offers, which was officially launched in April 2018, allows homeowners wishing to sell their property to receive an offer from Zillow with an analysis of the value of their own home. Zillow would like to buy, renovate and resell the real estate within 90 days or less. Zillow said, as part of his long-term goals, he believes he can buy 5,000 homes per month, borrow more than 3,000 per month, and generate $ 2 billion in annual segment revenue, more than doubling his size.

But so far The 90-day sales targets are not reached. Zillow said it has purchased a total of 686 homes since the launch of Zillow Offers, but has sold only 177 out of which 141 were sold in the fourth quarter. Zillow Offers is available nationwide in seven markets and is expected to be in 14 countries by the end of the year.

These forecasts are not without risk, and the US real estate market has been volatile in recent years, but volatile. And his steps so far are hardly seriously profitable. Forbes conducted a quick analysis, concluding that of the 141 Qillow homes sold in the fourth quarter, the only average gain was $ 1,723 per house, after accounting for the costs of buying, selling and renovating. It also has other competitors, especially rivals Redfin Corp.

RDFN, + 2.20%

RDFN, + 2.20%

RDFN, + 2.20%

with Redfin Now

Zillow moves to buy and sell Real The realtors initially worried about their core base – real estate agents. Here, about 70% of their turnover is achieved. Zillow said he is now making real estate agents core partners.

Ygal Arounian, an analyst with Wedbush Securities, said in a earnings preview that he "likes the story [vonZillow”[s] his next leg of a real estate disruptor," he said, "Zillow is still at an early stage of this Process and the risk / reward for 2019 is currently balanced. "

Another risk is that the amount of debt that Zillow may be forced to accumulate to complete his ambitions, the company said it now has a billion US – Dollars on credit lines to support the rapid growth of Zillow's offerings in 2019 and beyond.

Investors may be excited about Zillow's big momentum right now, but whether she has the ability to become a real estate investor Pinballing consumer goods is a question mark that will overshadow the stock until it proves otherwise.

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