Zillow Stock Forecast & Analysis

Written by Sean GraytokUpdated: 8th May 2022
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Our Zillow stock forecast will help you decide if it’s a buy or a sell after its recent dip (some would call it a crash). 

Zillow Stock Forecast: Background 

Zillow is a leading real estate marketplace that has several business segments, including:

  • Zillow Offers
  • Internet, Media, & Technology
  • Zillow Premier Agent
  • Zillow Mortgages

The company began selling affiliate leads to realtors but now is buying and selling thousands of homes across the country.

Next, we’ll look at Zillow’s investment potential by evaluating its growth metrics and digitization synergies.

Zillow Stock Investment Potential

#1. Zillow’s Growth

Zillow is a high-growth company that is moving fast. Here are some absurd facts about the company:

  • #1 U.S. Online Residential Real Estate App with 3x the number of daily active users as its nearest competitor
  • 67% of U.S. home buyers use Zillow
  • 25% of actual U.S. home buyers reached out to connect with Zillow in 2021
  • Revenue per mortgage customer: $9,000
  • Estimated $2T residential real estate opportunity 
  • 200+ million average monthly users 

The growth of these services shows Zillow’s intent to build a comprehensive real estate experience.

To better measure the entire ecosystem’s growth, Zillow is shifting its focus to gross profit dollars.

This holistic perspective allows the company to evaluate “the total enterprise gross profit pool that occurs when we offer multiple services to our customers.”

Zillow is a growth stock by every definition of the term. However, this shift in financial focus reveals the company is increasingly interested in long-term profitable growth.

Young people rely on mobile apps for every facet of their lives.

We use Zoom for work, Google to learn, Uber to get places, Block and PayPal to pay each other, Twitter for news, and Netflix for entertainment.

Why would renting, buying, and selling real estate be any different?

For example, more people search for “Zillow” on Google than “real estate.”

Zillow has a $12 billion market cap — a very small company given its reach. 

Zillow Stock Forecast: Economic Moat

Access to data is Zillow’s differentiator. On average, 223 million unique people visit Zillow each month.

Its search data alone provides the company with a significant advantage over its competition.

Zillow knows which markets are heating up and which are cooling off before anyone else. This gives Zillow immeasurable leverage now that it’s buying and selling homes.

It’s a market maker that has access to all the data.

Like Robinhood, it sells this data. But unlike Robinhood, it can ‘trade’ on this data given its foray into home buying and selling.

Zillow Stock Analysis: Q4 Earnings

Let’s take a look at Zillow’s Q4 2021 earnings report

  • Revenue: $3.88 billion vs $2.98 billion expected 
  • Net Loss: $261 million for the quarter and $528 million for the year

The financial numbers are what they are, but the stock jumped after the call for another reason.

The company announced it would be getting out of the home-flipping business faster than it previously expected. Shares jumped as much as 20% on this news. 

Zillow expects to see revenues between $3.12 billion and $3.44 billion for the coming quarter, which is aligned with analysts’ expectations of $3.26 billion. 

Zillow Stock Forecast: Top Competitors

Let’s meet Zillow’s top competitors in the real estate marketplace industry:

  • Trulia (which is owned by Zillow’s parent company)
  • Opendoor
  • HomeSnap
  • Realtor.com
  • Zumper
  • Redfin
  • Neighborhood Scout
  • Airbnb 

Expect this list to grow as Zillow continues to expand its offerings.

The 2021 version of Zillow is fundamentally different from the 2018 version. Who knows what the company will be doing in 2024.

Zillow Stock Forecast: The Risks

#1. Valuation

As previously mentioned, Zillow is a growth stock that trades at a high price-to-sales ratio.

Stocks with these profiles are vulnerable to hype cycles that can soar their share price.

Then they can plummet for no specific reason. Granted, high valuations are an easy scapegoat — like a 13x PS ratio.

#2. iBuying Homes (Updated)

This section used to be in the “investment potential” of the article. Allow us to Monday-morning-quarterback and reclassify iBuying as a bearish strategy for Zillow. 

Two years ago, Zillow began to evolve from a search-and-find real estate marketplace to participate in the real estate transaction itself.

In Q2 ‘21, Zillow purchased 3,805 homes and sold 2,086 homes. This was double the record number of purchases that Zillow made in the previous quarter.

Zillow has since cancelled their iBuying program and the stock has gotten destroyed. 

Zillow Stock Allocation in Your Portfolio

Here’s a thought exercise to help you with your allocation to Zillow:

  • Can Zillow recover, or will it ‘crash and not come back?’
  • How will Wall Street price shares of Zillow moving forward?
  • Zillow is swinging for the fences in a few different business segments — how will investors react if one of them fails?
  • Will the iBuying strategy work in the long term, or do the margins make it too risky?
  • Are short-term rentals a better business, like Airbnb (ABNB)?
  • Will Zillow offer shorter-term rentals and compete with Airbnb?
  • Is Zillow correlated to the real estate market? And is that good?

These questions matter to varying degrees depending on your investing time horizon and risk profile.

Zillow Stock Forecast: FAQs

Is Zillow a buy or sell?

Zillow is a buy if you’re a long-term believer in the company. The stock is 75% off its highs, representing a ‘buy the dip’ opportunity for those believers.

Is Zillow a dividend stock?

Zillow is not a dividend stock and does not pay a dividend. Instead of distributing cash flow to shareholders, Zillow reinvests into growth opportunities like Zillow Mortgages and Zillow Premier Agent.

What company owns Zillow?

Zillow Group is a standalone real estate marketplace company founded in 2006 by Rich Barton and Lloyd Frink. Today, 229 million unique users visit Zillow each month.

Bottom Line: Zillow Stock Forecast

If you’re a long-term investor, Zillow looks like a buy at these levels. It’s significantly down from its highs. 

But if a 50% drop doesn’t make you excited to buy more, consider owning a low-cost benchmark fund like the Vanguard S&P 500 ETF . 

Keep Reading:

This article is for informational purposes only, and it is not intended to be investment advice. Read our editorial guidelines and public equities research methodology to learn more about how we researched Zillow stock.

Sean Graytok
Sean Graytok

Sean Graytok is our Co-Founder and leading expert in investing and financial management. His work has been cited in leading industry publications, such as InvestorPlace and Business Insider. Sean is interested in the people and technologies that are improving the world.