Zillow (Nasdaq: Z) has been one of the best-performing stocks in 2021 and 2020. These gains were extended following Q4 earnings which topped analysts' expectations in terms of sales, earnings, and guidance. As a result, the stock was up nearly 27% in the ensuing trading sessions after earnings.
Inside the Numbers
In Q4, Zillow reported $0.18 per share in earnings which was a significant improvement from last year's loss of $0.49 per share. Analysts were looking for $0.13 per share. Revenue came in at $789 million which was above expectations of $741 million. For the full year, Zillow's revenue increased by 22%.
The pandemic did have a negative effect on Zillow Offers, the unit that buys and sells homes, as revenue was $302 million, compared to $603 million last year.
The pandemic benefitted Zillow in many aspects as it caused a surge in buying, and more people were using the platform to look at homes virtually. Zillow's website and app saw a 19% increase in traffic with a total of 9.6 billion visitors. The company has cemented itself as the "Google of real estate" as it's the first stop for many in the home buying process.
Like a lot of websites, Zillow has been successful in slowly increasing revenue by offering additional services and products beyond simple advertising, once it grows a substantial audience.
Stock Price Outlook
Real estate tech is one of the most interesting parts of the market and certainly has a lot of potential. We've seen tech disrupt so many different industries, leading to more speed and transparency while lowering transaction costs. The real estate market is in the early stages of being disrupted.
Of course, there are incentives for legacy players to stave off this disruption as they benefit from the current arrangement. Additionally, each state has its own laws and regulations around real estate, so there's a higher degree of difficulty.
However, this is Zillow's opportunity. The company is already disrupting the agent model as it lets people browse homes themselves. Additionally, disrupting real estate will be much more profitable given that home sales are in the six and seven digits. As the leading real estate tech company, this makes Zillow's long-term potential quite attractive. Another catalyst will be the robust housing market which looks set to continue strengthening due to low rates, low inventory, and a demographic bulge of Millennials forming households.