Long on Zillow (76% down from its ATH)
Key points:
- Next earnings is February 10th, you may want to wait for earnings.
- I have a small positions that I am planning to grow.
- Unrivalled brand (strong name.)
- Zillow owns over 70% of traffic for real state advertising.
- Re-structuring the business.
______________________________________________________
Zillow's idea was that they are going to be a 'price maker' rather than a 'risk taker.' They wanted to invest in homes, and flip them constantly, anticipating where the price will be within 2% time and time again. This sadly did not work. Zillow was unable to predict housing prices accurately enough and this resulted in them overpaying slightly on transaction, which in aggregate resulted in $400 million in loses from their home division in 2021.
Zillow has admitted that this is not working/did not work and are re-focusing their business. Zillow has been able to abandon the I-buying business model extremely fast, and the CEO has been very capable in this endeavour.
This resulted in 76% hit over a period of time. The question is, is this price now competitive?
______________________________________________________
The restructuring in a nutshell:
Zillow will create partnerships to create income / funnel profits at each different stage in the house transaction.
Partnerships will see revenue and the following stages of each transaction:
Flex, escrow, mortgages, and title insurance
______________________________________________________
Zillow group current segments:
- IMT - Internet, marketing and Tech (more profitable segment)
- Homes (Zillow is shuttering this business)
- Mortgages (smaller and less profitable)
______________________________________________________
Zillow has a huge run away in front of them. They have one of the most recognizable brands in the industry in the US. There is room for growth.
______________________________________________________
Insider buying:
Zillow has announced late in 2021 that they are buying $750 million in stocks and it is anticipated that they will buy more as they continue to liquidate their holdings from the previous I-buying segment.
______________________________________________________
Time horizon:
12-24 month time horizon for the trade
- Next earnings is February 10th, you may want to wait for earnings.
- I have a small positions that I am planning to grow.
- Unrivalled brand (strong name.)
- Zillow owns over 70% of traffic for real state advertising.
- Re-structuring the business.
______________________________________________________
Zillow's idea was that they are going to be a 'price maker' rather than a 'risk taker.' They wanted to invest in homes, and flip them constantly, anticipating where the price will be within 2% time and time again. This sadly did not work. Zillow was unable to predict housing prices accurately enough and this resulted in them overpaying slightly on transaction, which in aggregate resulted in $400 million in loses from their home division in 2021.
Zillow has admitted that this is not working/did not work and are re-focusing their business. Zillow has been able to abandon the I-buying business model extremely fast, and the CEO has been very capable in this endeavour.
This resulted in 76% hit over a period of time. The question is, is this price now competitive?
______________________________________________________
The restructuring in a nutshell:
Zillow will create partnerships to create income / funnel profits at each different stage in the house transaction.
Partnerships will see revenue and the following stages of each transaction:
Flex, escrow, mortgages, and title insurance
______________________________________________________
Zillow group current segments:
- IMT - Internet, marketing and Tech (more profitable segment)
- Homes (Zillow is shuttering this business)
- Mortgages (smaller and less profitable)
______________________________________________________
Zillow has a huge run away in front of them. They have one of the most recognizable brands in the industry in the US. There is room for growth.
______________________________________________________
Insider buying:
Zillow has announced late in 2021 that they are buying $750 million in stocks and it is anticipated that they will buy more as they continue to liquidate their holdings from the previous I-buying segment.
______________________________________________________
Time horizon:
12-24 month time horizon for the trade
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