Zillow Group (ZG) stock fell sharply in after-hours trading and continued weaker in today’s premarket session after the company’s guidance came up short despite a resurgent housing market in the U.S.
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The online real estate firm posted earnings per share (EPS) of $0.27 for the Fiscal fourth quarter, surpassing analysts’ estimates of $0.22, while revenue came in at $554 million, ahead of about $538 million expected.
It comes after existing home sales in the U.S. rose to 4.24 million in December, which was a 9.3% increase from the previous year, the biggest year-on-year gain since 2021.
ZG Guidance Comes Up Short
Despite this, guidance for the Fiscal 2025 first quarter was softer than expected, with revenue seen in the range of $575 million to $590 million, under the consensus estimate of nearer $600 million.
Adjusted EBITDA was forecast in a range of $125 million to $140 million, below the $158 million consensus expected. Zillow class A and class C (Z) shares were down over 6% in the premarket session on Wednesday.
Although existing home sales hit a 10-month in December home sales in 2024 were the lowest in three decades as prices hit a record high and U.S. interest rates remain uncertain. The start to 2025 has been soft, meanwhile.
The company said it has a target of low to mid-teens revenue growth for 2025, with EBITDA margins expected to further expand.
Revenue Progress Strong
Breaking down the Q4 figures, Residential revenue was up 11% year over year in Q4 to $387 million. Mortgages revenue increased 86% year over year to $41 million in Q4, due primarily to a 90% increase in purchase loan origination volume to $923 million. Rentals revenue increased 25% year over year to $116 million in Q4, primarily driven by multifamily revenue growing 41% year over year, the firm said.
Is ZG a Good Stock to Buy?
Overall, Wall Street has a Moderate Buy consensus rating on ZG, based on 10 Buys, seven Holds and one Sell. The average ZG price target of $82.60 implies about 1% downside after shares rose 20% in 2025 so far, though estimates could be revised after the earnings update.
