Zillow Group will report its fourth quarter financials Thursday afternoon for the first time since its surprising decision to shut down the company’s home-buying business.
As part of its third quarter earnings report in November, the Seattle real estate giant said it was ending Zillow Offers, its “iBuying” home-flipping program. It reported a write-down of more than $500 million related to the shutdown of Zillow Offers, and announced a 25% cut to its workforce that is taking place over several quarters.
Since the news in November, Zillow’s stock has lost nearly half its value, trading Thursday around $48/share.
The fourth quarter report should provide more details about the state of Zillow’s business as transitions away from Zillow Offers, which made up more than 60% of the company’s revenue in the third quarter.
Zillow is “at a moment when we think it needs to demonstrate core business stability and growth before investors can feel safe owning it,” wrote RBC Capital Markets analyst Brad Erickson in a report this month.
Erickson added that investors are trying to figure out how much Zillow can continue growing in relation to the overall real estate market.
Home prices were up 15.2% in December, while the number of homes sold fell 9% and the number of homes for sale fell 33.2%, Redfin reported. Redfin economists project that home-price growth is expected to slow by the end of 2022.
In regard to real estate tech stocks more broadly, analysts with Wedbush said this week that it’s “hard to argue that investment sentiment is improving, or will do so, without more clarity on rates on how housing macro shakes up this year.”
Analysts will be watching growth from Premier Agent, Zillow’s traditional business of selling advertising to real estate agents.
Zillow is “still in need of laying out its updated plans to disrupt the residential real estate transaction, what investments will look like there, and how the exit from iBuying impacts Premier Agent this year,” Wedbush analysts said.
Zillow originally projected annual revenue of $20 billion by 2024 from Zillow Offers, which launched in 2018 and was billed as a way for consumers to avoid the hassle, time commitment and uncertainty of a traditional sale.
Unpredictability in forecasting home prices proved too tough a task for the company’s algorithm and Zillow wasn’t prepared for “earnings and balance-sheet volatility,” according to CEO Rich Barton in November.
Zillow is expected to report revenue of $2.95 billion, up from $789 million last year, and a loss of $1.15 per share for the fourth quarter, down from earnings per share of $0.44.