Zillow Group Inc Stock Soars 316% Since March, Fueled by Work-from-Home Economy

Zillow Group Inc Remains Bullish Following Strong Q2 Results

Zillow Group Inc (NASDAQ:Z) is an oft-overlooked tech stock that has been on fire since the broader markets bottomed in March.

Because of the coronavirus pandemic and economic crisis, more and more people have been rethinking what their home is used for. It certainly doesn’t hurt that borrowing rates are near record lows. Add to that a lot of pent-up demand and, because of COVID-19, greater interest in suburban markets, and you’ve got a red-hot real estate market.

And Zillow Group has been one of the top beneficiaries of this trend. In fact, Zillow Group Inc stock has climbed 140% year-over-year, has gone up 82% since the start of 2020, and has soared 316% since March. The stock continues to trade at record levels.

There is every reason to believe this trajectory will continue. In July, sales of previously owned homes in the U.S. surged by the greatest amount on record. Closing transactions advanced 24.7% from the previous month to a 5.86 million annualized rate. That represents the strongest growth since the end of 2006. Housing prices jumped 8.5% year-over-year, on an unadjusted basis, to the highest level on record.

According to Lawrence Yun, the chief economist at the National Association of Realtors, the housing market has moved past the recovery phase to “a booming stage.” (Source: “U.S. existing-home sales surged in July by most on record,” BNN Bloomberg, August 21, 2020.)

Chart courtesy of StockCharts.com

Z Stock Overview

Zillow Group Inc reportedly makes it fun to house hunt and easier to buy, rent, finance, and move. The Seattle, Washington-based company is home to the largest portfolio of online real estate brands, attracting 218 million unique users each month. (Source: “Overview,” Zillow Group, Inc., last accessed August 21, 2020.)

Whether they’re selling, buying, renting, or financing, millions of Americans are turning to Zillow to find what they want. The company’s brands and businesses include Zillow Premier Agent, Zillow Offers, Zillow, Zillow Rentals, Zillow Home Loans, and Zillow Closing Services.

So, yes, Zillow offers everything in an online one-stop-shopping experience.

Better-Than-Expected Q2 Results

On August 6, Zillow Group Inc announced that revenue for the second quarter ended June 30 had increased 28% year over year to $768.0 million. (Source: “Zillow Group Reports Second Quarter 2020 Financial Results,” Zillow Group Inc, August 6, 2020.)

The company reported a second-quarter net loss of $84.0 million versus a second-quarter 2019 loss of $71.0 million. Zillow reported consolidated adjusted earnings before interest, tax, depreciation, and amortization (EBITDA) of $16.0 million, a 590% increase over adjusted EBITDA of $2.3 million, recorded in the same period the year before.

Zillow exited the second quarter with its highest cash balance in history, growing cash and investments to $3.5 billion from $2.6 billion at the end of the first quarter of 2020.

“Zillow’s second quarter results are even better than we had hoped, and firm up our belief that powerful tailwinds in both real estate and technology are rapidly converging, with Zillow at the nexus,” said Zillow Group co-founder and CEO Rich Barton.

“I believe we are at the dawn of a Great Reshuffling, as COVID and work-from-home policies are inspiring people to rethink their homes and consider moving. In addition, real estate, like other industries, is experiencing an acceleration in technology adoption, as people move their shopping habits from offline to online. We’re lucky to be in a position to serve our customers no matter how they want to move…” Barton concluded.

Analyst Take

When COVID-19 hit, most people had no idea what the future held. After the initial shock and fear, home buyers came to realize that we’re living in a different world: forced to practice social distancing, stay at home, work remotely, and shop online.

The faster-than-expected recovery in the housing market coupled with near-record-low mortgage rates has been a boon for Zillow Group. And those tailwinds are expected to continue. In fact, the company’s businesses entered the third quarter performing better than Zillow expected pre-COVID-19.