Zillow Group Share Price Forecast December 2021 – Time to Buy Z?
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Shares of online real estate database company (NASDAQ: Z) are in the green today, closing at $60.39 as of December 3rd (19:59 EST). The shares moved higher on Friday, which has been caused by the company’s announcement of buying back shares worth $750 million. The company exited the iBuying business Zillow Offers last month after which the shares have declined over 70% off their highs for the year.
Zillow Group – Technical Analysis
According to Zillow Group’s financial statement, the market cap of the company is at $15.329 billion with total assets worth $10.838 billion. Revenue for 2020 was at $3.34 billion with a profit margin of -4.85% compared to $2.74 billion in 2019.
Oscillators such as Relative Strength Index (14)(42.55), Stochastic %K (14, 3, 3)(26.42), Commodity Channel Index (20)(14.86), Average Directional Index (14)(40.71) and Neutral Awesome Oscillator(−16.79) are neutral. On the other hand, moving averages such as Exponential Moving Average (30)(66.40), Simple Moving Average (30)(69.45), Exponential Moving Average (50)(73.83), Simple Moving Average (50)(77.65), Exponential Moving Average (100)(85.95)are pointing towards a sell action.
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Recent Developments
Zillow Group ‘s previous concept, IBuying combined real estate with AI technology where it offers thousands of homes directly from sellers each year with the intention of flipping them for a profit. Apart from this, the company has other sectors such as a mortgage arm, provides closing services, and even sells software to traditional agents to help them build their networks. With the total U.S. real estate market at $36 trillion, the company’s $6.6 billion seems minuscule.
Zillow’s iBuying business was getting affected due to the inventory of homes. On Thursday, the company announced that it had come to terms to sell over half of the homes it previously owned and expects to generate revenue of $2.3 billion to $2.9 billion in the fourth quarter from home sales. This is up from $1.7 billion as previously expected. Management expects Zillow Offers to be cash flow-neutral, including paying off $2.9 billion in debt. IBuying was bleeding cash and the sale is good news for investors.
Should You Buy Z Shares?
The $750 million stock buyback authorization is a huge number for a company that currently has a $13.8 billion market cap. Management can reduce shares outstanding by over 5%, which would increase earnings-per-share (EPS) growth long term. It feels like the company could be using up some of its cash to appease investors who have lost confidence.
Zillow should have a very profitable core once its sheds its homebuying business. The company’s internet, media, and technology segments recorded a revenue of $480 million and $130 million in income before taxes in Q3 2021. This was up from 16% for the year. Zillow’s long-term target should be cash flow positive. It’s a good sign that management can now use that money to buy back stock instead of buying homes.
Zillow’s main business will continue to be its listing services and online platform. While IBuying looked promising, it proved to be a costly mistake. However, a substantial number of investors still believe in the company’s online services such as Premier Agent, Zillow Rental, Zillow Closing Services, and Home Loans as well as its internet and media division. This proves that the company is much the same like it was before iBuying. Investors hoping for a recovery in shares will have to wait a while, as the shares spent most of 2021 sliding from a high of about $200 amid concerns about iBuying.
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