Is Zillow Group a Buy Under $60? -Breaking
Zillow (Z), an online real estate firm, recently announced that it will close its iBuying division. Z’s shares plummeted in price following the report and are currently trading at less than $60. Z’s shares are now trading at less than $60 because of the decline in U.S. home prices. Is the real-estate giant going to be able, in the near future, to reverse its losses? We have our opinions. Zillow Group, a digital realty company, is headquartered in Seattle, Wash. It operates realty brands via mobile apps and web sites in the United States. It operates through three segments: Homes; Internet, Media & Technology; and Mortgages. Z shares are currently trading at $54.26. This is a 57.2% decline in value year-to-date, and 41.7% during the last month. The stock’s current trading levels are well below their 50-day and $200-day moving averages. This is close to the 52-week low.
After the announcement that it would be ending its home-flipping venture due to inability to accurately predict the housing market, the stock plummeted 25%. Rich Barton CEO stated, “We decided that further scaling-up Zillow Offers would be too risky, volatile to earnings and operations and too low in return on equity opportunity and too limited in its ability to service our customers.” Z’s margins have been eroded by supply chain bottlenecks, high costs and other factors.
Its iBuying unit was responsible for the company’s third quarter net loss of $328.17 millions. The iBuying unit, also known as instant buying, allowed homeowners to quickly sell their houses to Z and receive cash. This eliminated the long processes associated with traditional sales. Due to the inventory it has purchased, losses will not exceed $240 million and write-downs of $265 million are unlikely. Edward Yruma from KeyBanc states in a research note that Z’s homes are worth half of what they were paid.
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