Andrew Harrer | Bloomberg | beautiful pictures
Zillow shares jumped as much as 20% in extended trading on Thursday after the digital real estate company said it would exit the home business more quickly and economically than expected. before.
Zillow’s fourth quarter earnings report following a disastrous period for the company, following an attempt to disrupt the iBuying, or instant buy market, in which the company purchases homes directly from owners. Zillow said in November that they were out of business, admitting that their algorithms couldn’t accurately forecast housing prices, putting the entire company at risk.
The company posted a loss of $261 million in the fourth quarter and $528 million for the year, with the entire deficit attributable to the home business. However, Zillow said it sold 8,353 homes during the period, beating prospects for about 5,000 sales and ending the quarter with about 10,000 homes in inventory.
“We’ve made significant progress in mitigating our iBuying business – selling homes faster than we anticipated with better unit economics than we expected,” said CEO Zillow Rich Barton writes in the quarter shareholder letter. “We feel more confident today that eliminating iBuying and eliminating housing market balance sheet risk for our company and our shareholders was the right decision.”
At the time of its announcement in November, Zillow also said it was cutting about 25% of its workforce.
Due to the faster pace of home sales, sales of $3.88 billion in the fourth quarter exceeded analysts’ average estimate of $2.98 billion, according to Refinitiv. More than 85% of revenue comes from the iBuying division, with most of the rest generated by the home listing group, known as internet, media and technology (IMT).
According to FactSet, revenue in IMT grew 14% to $483.2 million in the fourth quarter, narrowly topping the $481.9 million median estimate.
For the first quarter, Zillow expects total sales of $3.12 billion to $3.44 billion. Analysts had predicted revenue of $3.26 billion.
Zillow is returning to the marketplace, connecting buyers and sellers with tools and technology to simplify the process. That includes working with an extensive dealer network and helping consumers with their mortgages.
The company expects that number to translate into $5 billion in revenue by 2025 and a 45% adjusted profit margin.
“We want to acknowledge that the past few months have been challenging for all of us – Zillow management, employees and investors,” Barton wrote. “But innovation is a bumpy road.”
Shares jumped as high as $59.04 in a few hours. As of the end of Thursday, it was down 24% this year.
