Zillow lost over $230 million in its iBuying sellout, but the stock continues to rise

Three months after a house-flipping initiative imploded in embarrassing public exposure, Zillow Group Inc. reported record revenue from underwater home sales on Thursday and predicted big sales in early 2022, making to push up the shares at the end of the session.

Zillow Z,
-1.75%
ZG,
-1.26%
announced a loss of $261.2 million in the fourth quarter, or $1.03 per share, on record revenue of $3.88 billion, compared with $789 million a year ago. After adjusting for stock-based compensation and more than $70 million in impairment and restructuring costs, Zillow posted a loss of 42 cents per share, after posting adjusted earnings of 41 cents per share a year ago.

Analysts on average had expected an adjusted loss of 90 cents per share on sales of $3.01 billion, according to FactSet. Zillow shares rose nearly 15% in after-hours trading immediately after the earnings release, after closing 1.8% lower at $48.79.

Zillow shares have plunged 24% in the past three months since executives admitted in their previous earnings report that a company set up to flip homes bought far too many homes at too high prices. At that time, Zillow executives expected to lose more than half a billion dollars and lay off around a quarter of staff due to the huge miscalculation.

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Shares rebounded a little after executives said in December they had already found buyers for more than half of the homes they still owned and expected to use the millions raked in from sales to redeem shares. In Thursday’s report, they said the effort is still ahead of expectations and will result in positive cash flow, despite disclosing an average loss of $27,609 from 8,353 homes sold in the fourth quarter. , a total loss of over $230 million.

“We have made significant progress in our efforts to reduce our iBuying
business – sell homes faster than expected with better unit economics
than expected,” Chief Executive Rich Barton and Chief Financial Officer Allen Parker wrote in a letter to investors. “The liquidation process is proceeding smoothly and efficiently, and we expect it to generate positive cash flow.”

Barton and Parker have bet on iBuying as a key part of what they’ve called “Zillow 2.0,” but said in Thursday’s letter that the breakup of that company hasn’t changed strategy.

“Our mission has been stable and our vision for Zillow 2.0 remains unchanged,” they wrote.

Instead of being an integral part of the home buying process like iBuyers, Zillow executives now want to create an essential mobile app that can help buyers and sellers navigate the process.

“To execute this strategy, we are focused on building the ‘housing super app’ – an integrated digital experience where Zillow connects all the fragmented pieces of the moving process and brings them together in one transaction platform,” wrote they wrote. “We are well positioned to execute here, given our position in the hearts and minds of consumers today, with more than 3 times the number of daily active app users than our biggest competitor. close.”

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Zillow’s iBuying business helped boost revenue, and the company’s forecast showed it would be a different business after it abandoned the effort. In 2021, Zillow posted revenue of more than $8 billion, but executives said Thursday their long-term goal is to hit $5 billion in revenue by 2025 after exiting the home flipping business. .

For the first quarter of 2022, Zillow executives have forecast total revenue of $3.12 billion to $3.44 billion, with a midpoint of $3.3 billion, while analysts s expected an average turnover of 3.26 billion dollars. They expected an adjusted Ebitda of $124 million to $174 million, while analysts expected a loss under that standard of $13 million, according to FactSet.