Zillow Group, Inc. (NASDAQ: ZG and NASDAQ: Z) shares gained over 13% during the extended trading session on February 10, after the digital real estate company delivered robust fourth-quarter revenues and also provided impressive long-term growth targets.
The revenue beat was driven by a faster-than-expected selloff of homes in the iBuying or instant buying portfolio.
Q4 Revenues Beat
Markedly, revenues jumped 392% year-over-year to $3.9 billion and massively exceeded consensus estimates of $2.69 billion.
The increase in revenues reflected growth above expectations for all three reportable segments. Notably, the Homes segment revenue grew 1000% to $3.3 billion driven by a faster-than-anticipated wind-down of iBuying operations.
However, the company reported a consolidated adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) loss of $0.4 million for Q4. Segment-wise, the company reported Adjusted EBITDA income or (loss) of $220 million, $(206) million, and $(14) million for the IMT, Homes, and Mortgages segments, respectively.
FY2022 Outlook & New 2025 Targets
Management provided the financial guidance for the first quarter of FY2021 and further introduced its long-term goals.
For Q1 of FY2022, revenues are projected to be in the range of $3.12 billion to $3.44 billion.
Upon completion of the wind-down of iBuying operations, expected to occur in the second half of 2022, the company expects the net impact of the wind-down of inventory (including inventory losses), operating costs, and restructuring costs to be cash-flow positive.
Encouragingly, the company introduced new 2025 targets with expectations of $5 billion in consolidated annual revenue, as well as an adjusted EBITDA margin of 45%.
CEO Comments
Zillow CEO, Rich Barton, commented, “We’re investing aggressively in innovations that help both buyers and sellers by delivering an integrated set of tech-enabled solutions on our ‘housing super app’ along with our excellent partners. We know millions of movers today start with Zillow, and in the future, we plan to be with them every step of their journey.”
Wall Street’s Take
Following the Q4 results, JMP Securities analyst Andrew Boone reiterated a Hold rating on Zillow.
Overall, the stock has a Hold consensus rating based on 2 Buys and 7 Holds. At the time of writing, the average Zillow Group Class A stock price projection was $74.71, which implies 56.1% upside potential from current levels.
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