Zillow Group - $Z - Earnings Analysis: Strong revenue growth in both For Sale and Rentals segments.

Business Model

Zillow Group generates revenue primarily from two major categories: For Sale and Rentals. For Sale revenue includes revenue from residential and mortgages. Rentals revenue is generated from multifamily properties.

Revenue Sources

• Residential revenue, derived from premier agent and other advertising services for real estate professionals.
• Mortgages revenue, derived from loan originations through Zillow Home Loans.
• Rentals revenue, derived primarily from multifamily properties advertising on Zillow's platform, paid inclusion subscription model.

Income Statement Analysis

• Total revenue increased by 17% year-over-year, exceeding the outlook range.
• Mortgage revenue grew significantly by 86% year-over-year due to a 90% increase in purchase loan origination volume.
• Rentals revenue increased by 25% year-over-year, driven primarily by multifamily revenue growth of 41%.
• Net loss decreased from $(73) million to $(52) million, reflecting improved financial performance.
• Adjusted EBITDA increased from $69 million to $112 million, indicating enhanced operational efficiency.

Balance Sheet Analysis

• Cash and investments decreased from $2.2 billion to $1.9 billion, primarily due to the settlement of the 2026 convertible debt.

Cash Flow Analysis

• Net cash provided by operating activities increased from $86 million to $122 million, indicating improved operational performance and cash generation.

Capital Allocation

Zillow Group is actively managing its capital through share repurchases, reducing convertible senior debt, and strategic M&A to accelerate growth. The company aims to maintain a flexible financial position and generate sustainable GAAP-profitable growth.

Management Commentary

Achieved stated goals for the year, including double-digit revenue growth.

Expect to keep up momentum in 2025.

The company has clear path to $1B+ revenue from Rentals.

Overall Sentiment: Positive, with a focus on executing strategy, driving revenue growth, and achieving GAAP profitability.

Recommendation

Rating: Buy

Reason for Rating: Zillow Group demonstrates strong financial performance, growth prospects, and effective capital management, making it a compelling investment opportunity.

Disclaimer: This report is for informational purposes only and not investment advice. The analysis is based on limited information and subject to change. Investing in securities involves risks, including potential loss of principal. Past performance doesn't guarantee future results. Always conduct your own research, understand the risks, and consult a financial professional before making investment decisions.

Generated on: 2/12/2025, 3:09:28 AM