Home News Zillow is almost done selling homes, but stock slumps as the hard part is still to come

Zillow is almost done selling homes, but stock slumps as the hard part is still to come

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Zillow Group Inc. has nearly completed the sale of all the homes it bought in the flurry that led to the iBuying business’s flames, but plans for the future sent its share price plummeting in an unexpected long-term deal on Thursday. .

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On Thursday, it reported second-quarter earnings of $8 million, or 3 cents a share, of $1.01 billion, down from $1.31 billion a year ago. After adjusting for stock-based compensation and other impacts, the real estate services business reported earnings of 47 cents per share, up from 44 cents a year ago.

On average, analysts expected Zillow to report adjusted earnings of 35 cents per share on sales of $985 million, according to FactSet. The stock fell more than 8% in after-hours trading just after Thursday’s earnings release, rising 0.2% to close at $38.13.

Zillow is expected to continue to show significant declines in revenue as it exits the iBuying business and goes through a period of desperate selling. Homes purchased in large quantities and at high prices last year, only 71 homes were sold at the end of the second quarter. Revenue in the third quarter was down from $431 million to $461 million from $1.74 billion in the same period last year, well below his average analyst estimate of $563 million. I’m here.

After discontinuing the iBuying initiative, Zillow management’s turnaround plan is to combine assets from two other segments (Internet, Media & Technology (IMT), and Mortgage Business), with buyers and sellers Navigate the entire buying and selling process.but they will have to do it Sluggish second-hand home sales Rising mortgage rates created a housing market, Management admits ‘uncertainty’‘, a view they clarified Thursday, and in a less aggressive way.

“Today, it’s even harder to get a home,” Giraud executives wrote in a letter to shareholders on Thursday. “Rapidly rising mortgage rates are exacerbating existing affordability challenges caused by unprecedented home price hikes. The slump and reduced buyer demand have cooled the previously hot sellers market.”

“Ultimately, when all these factors combined, the housing industry saw total transaction value flat year-over-year in the second quarter while various leading indicators deteriorated. After a relatively stable July, we expect a significant increase in total industry transaction volume in the second half of 2022.
Contracts are increasing year by year,” they said.

Zillow made two separate announcements on Thursday showing how it can achieve its “super app” plan. Multi-year partnership with iBuyer Opendoor Technologies Inc.
Open,
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When A new tool that allows home shoppers to browse five different markets at once.

The problem with Zillow trying to create a “super app” is that it relies on advertising dollars and other activities by real estate professionals. These professionals may be looking to cut back on their own spending as the hot pandemic-era housing market cools.that’s why RBC analysts warned last week that this could be a ‘back up truck’ quarterZillow executives announce bad news, Wall Street estimates ‘really reset’.

Analysts said two-thirds of agents interviewed said they have reduced or intend to reduce their spending at Zillow, up from 56% in April. With the summer season coming to an end and macroeconomic conditions trending downward after months of slowdown, things could get worse before they get better.

“Quarter (several) leads and declining conversions are finally hitting.
Analysts lowered their price target from $50 to $46 while maintaining their outperform rating. “We believe in some [Premier Agents] We didn’t necessarily cut spending during the first three months of the buyer/available housing decline that supposedly started in February, but the pain of that persistent trend is now in its sixth month. .
These updated findings.

IMT segment revenue remained flat at $475 million in the second quarter, below the average analyst estimate of $482 million, and mortgage revenue was $29 million, down from $57 million a year ago. It fell below the average analyst estimate of $36 million.

Forecasts for these two segments also fell short of analyst expectations. Zillow executives forecast his IMT revenues for the third quarter from $409 million to $434 million, while analysts averaged $433 million for mortgages. projected revenue of $22 million to $27 million.

Zillow’s stock has fallen 65.9% over the past year, along with the S&P 500 Index.
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It fell 4.2%.

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