What’s Lit the Fuse Under Soaring Zillow Stock

When Zillow Group Inc. (NASDAQ: Z) reported fourth-quarter and full-year 2019 results after markets closed Wednesday, the consumer real estate firm posted an adjusted loss of $0.26 per share on revenue of $943.95 million for the quarter. In the year-ago period, the company reported a break-even per-share result on $365.34 million in revenue. Analysts had forecast a loss of $0.30 per share and revenues of $810.94 for the most recent quarter.

For the full year, Zillow reported a loss of $0.54 per share and revenues of $2.74 billion, compared with 2018 earnings per share of $0.39 and $1.33 billion in revenues. Analysts were looking for a net loss of $0.63 and revenues of $2.61 billion.

On an adjusted EBITDA basis, the net loss for the quarter totaled $3.18 million, compared with a GAAP net loss of $101.21 million. For the full year, the adjusted EBITDA loss totaled $38.9 million, with a GAAP net loss of $305.4 million. On a GAAP basis, the per-share loss in the quarter was $0.49 and the annual loss per share totaled $1.48.

Share-based compensation remains as the largest adjustment to the company’s losses, totaling $198.9 million in 2019, compared to $149.1 million in 2018 (excluding one-time impairment charges of $79 million in 2018). Interest expenses were the second-largest adjustment, totaling more than $101 million in 2019 and more than $41 million in 2018.

CEO and co-founder Rich Barton said:

In all, I’d characterize 2019 as tumultuously remarkable. We’re in the midst of a multi-year expansion to rewire real estate transactions and streamline how our customers buy, sell, rent and borrow that dramatically expands our market opportunity and profit potential. Our team’s strong execution delivered record Q4 and full-year results that beat our outlook on every measure.

For the first quarter of fiscal 2020, Zillow did not provide full-year revenue or adjusted EBITDA guidance “due to early stages of our Homes segment and mortgage origination business, [but] we are targeting ranges that we expect will deliver Adjusted EBITDA in the break-even range for full-year 2020.”

For the first quarter, the company forecasts revenues of $1.02 billion to $1.06 billion and an adjusted EBITDA loss of $19 million to $37 million. Analysts are estimating a first-quarter loss per share of $0.27 and revenues of $934.3 million. For the fiscal year, the consensus estimates call for a loss per share of $1.11 and revenues of $4.42 billion.

The smaller-than-expected adjusted loss and the solidly higher revenues have proven to be catnip for investors Thursday morning. Combined with the expected break-even adjusted EBITDA forecast, the stock is nearly irresistible.

Investors pumped up the shares by more than 19% in early trading Thursday, sending the shares to a new 52-week high of $65.00. The 52-week low is $28.47, and the consensus price target is a mere $37.50.

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