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Zillow also has its Mortgages, which are meaningfully smaller than the other two segments and not a needle mover on the investment thesis.Īs you can see above, as of Q2 2021, we see that Zillow's IMT is substantially profitable, while its other two segments, Homes and Mortgages are unprofitable. This is the digital buying and selling of residential real estate.

Next, Zillow has its newer segment, Homes. However, management has guided for Q3 and Q4 of this segment's EBITDA margins to compress to around 37% as Zillow invests in marketing, staffing, and technology. You can see that during Q2 2021, IMT EBITDA margins reached 46%. This is an advertising platform that allows for the discoverability of residential properties. Zillow's IMT segment is its legacy segment. This level of pessimism I contend is unjustified. This is despite the easy comps with last year as well as the rapidly growing top line expected for the back half of 2021. What you can see above is that both Zillow and Opendoor ( OPEN) are down in 2021. Yet, the share price is down significantly in 2021. This time last year, Zillow's Q3 and Q4 were both negative mid-teens growth rates, now, Q3 is expected to come out smashing and it's likely that Q4 2021 is also going to come out strong. Source: author's calculations, **company guidanceĪs you can see above, Zillow's Q3 2021 guidance points to a mighty strong turnaround from the performance witnessed in the same period a year ago. Right now, paying 2x next year's revenues already prices in a lot of negativity in this name.īefore I dig in further here, I wish to highlight Tyler Okland's great work.

However, the underlying company is making all the right moves and guiding next quarter to be up more than 200% y/y.Įven though its IMT segment is growing at a reasonable rate and mightily profitable, investors are shunning this stock as they are uncertain of Zillow's prospects in its iBuying segment. Zillow Group ( NASDAQ: Z) has seen its share price fall more than 30% from its highs. BernardaSv/iStock via Getty Images Investment Thesis