Zillow Group Shares Dip after Quarter 4 Earnings but the Promoters Remain Upbeat

Promise to breach the $1 billion revenue barrier in 2017

Although Zillow Group, Inc. (NASDAQ: Z), the Seattle-based online real estate online data base and search engine company, reported a 34% year-on-year revenue growth in the fourth quarter in 2016 which stood at $227.6 million, the stock still fell. It needs to be noted here that the stock has climbed by as much as 120% over the last year and is considered to be a hot chip in an investor’s portfolio right now. Despite the temporary jolt, the company seems to be perfectly positioned to expand its operations in a market which promises enough for real estate investors, dealers, agents, promoters and even the buyers.

In a prepared statement released to the press, Zillow Group CEO Spencer Rascoff has confidently predicted that his company’s revenue should breach the $1 billion psychological barrier by the end of 2017. The company has also dismissed ideas that it was worried with a temporary fall in the stock price which may indicate lack of investor confidence in the company.

They are hopeful that the bubble would continue for some more time with a new U.S. Federal administration which is expected to be investor and business friendly. Even though the market may remain a little soft in 2017, it won’t have any potential impact on the long-term growth plans of the company.

Although analysts had predicted earnings per share (EPS) to be around $0.11 on a 4th quarter revenue of $223 million, the company has not only bitten the revenue estimate but has also crossed the EPS estimate by posting a non-GAAP EPS of $0.14.

Positive tone

The statement released by Zillow stuck a confident note when it observed that 2016 had been a phenomenal year for the company as it witnessed record annual revenue and robust site traffic. It also informed its investors that it had bitten expectations in the fourth quarter, last year.

Speaking on the context of the sudden dip in share price, Zillow CFO Kathleen Philips explained in an interview that it could have been caused by speculative, short-term investors looking for further margin expansion in 2017. She said that it was an exciting time for the company and they looked forward to rake in more investments so that they can create more long-term value for the esteemed shareholders.

Although there was positivity, a reason for concern could be a quarter-on-quarter drop in average monthly unique visitors from 164 million in the third quarter to just 140 million in the fourth quarter. However, there was still an impressive 13% increase year-on-year in the fourth quarter average monthly unique visitors figure.  

Zillion Group has also revealed that it has successfully mitigated potential risks arising from its shift to a new premium agent pricing model and revealed that there has been a successful transition. The company also added that it was deemphasizing display revenue to improve user experience.

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