Zillow Group crushes Q3 estimates with $657M in revenue and record traffic amid housing boom

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The U.S. housing boom is helping boost business at Zillow Group, which beat Wall Street expectations for its third fiscal quarter.

The Seattle real estate giant reported $656.6 million in revenue and non-GAAP earnings per share of $0.39. Analysts expected revenue of $572 million and earnings per share of $0.12. Revenue was down 12% from the year-ago quarter, but its $39.5 million in non-GAAP net income was up more than $100 million from last year.

Traffic to Zillow’s mobile apps and websites reached a record 236 million average monthly unique users, up 21% year-over-year. Total visits reached 2.8 million, up 32% and another record.

Zillow is riding a riding a trend of increased home ownership driven in part by record-low mortgage rates. The housing market has also bounced back after stalling when COVID-19 hit the U.S. in March. The shift to remote work is also giving people more flexibility for where they live.

In a letter to shareholders, Zillow CEO Rich Barton said people are using Zillow more than ever as the home becomes the office, the gym, the classroom, and more amid the pandemic. He pointed to two tailwinds — an increased desire and ability to move, and more people using tech to find and buy their home — helping drive Zillow’s growth.

“We believe these tailwinds are durable, supported by low interest rates and demographic shifts, as Millennials age into their prime home buying years with Gen Zs lining up behind them,” Barton noted. “Also, continued investment in technology is enabling people to do more of their shopping and transacting online. As a leading digital real estate company, we are well positioned to serve our customers and partners — both now and in the future.”

Existing home sales were up 9.4% in September compared to August, and up more than 20% year-over-year, according to the National Association of Realtors. Median home prices were up 15% year-over-year last month to a record $322,375, while active listings fell 29% last month to an all-time low, according to Redfin. U.S homeowners have gained $2 trillion in home value this year.

In March, Zillow laid out its coronavirus playbook with plans to slash expenses, freeze hiring, and cut marketing spend. But Zillow’s stock price has quadrupled since March, trading at around $104/share on Thursday. Zillow’s market capitalization has spiked to more than $23 billion.

Shares were up 5% in after-hours trading Thursday following the earnings report.

Revenue from the company’s Premier Agent business last quarter was up 24% to $298.7 million, while revenue from the Mortgages segment was up 114% to $54.2 million.

Zillow’s “Homes” segment, which includes its Zillow Offers home-buying and selling arm, brought in $187.1 million in revenue with a loss of $75.6 million before income taxes. Revenue was down 51% due to a pause on home-buying activities earlier this year. Zillow stopped Zillow Offers as the COVID-19 outbreak began but the business is now active in all 25 markets.

The company sold 583 homes and purchased 808 homes, ending the quarter with 665 homes on its balance sheet, up from 440 last quarter.

Last month Zillow cut about 80 positions from its Zillow Offers operation, streamlining its management structure in some of the 25 markets where the service has launched.

The service, which competes with companies such as Seattle-based Redfin and San Francisco-based Opendoor in the direct purchase and sale of homes, is still targeting an overall expansion in the coming year.

The iBuyer market is getting more attention as Opendoor prepares to become publicly traded via a special purpose acquisition company, or SPAC. Opendoor’s investor presentation shows $4.7 billion in revenue in 2019 with a loss of $218 million before interest, taxes, depreciation and amortization.

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