Zillow Jumps 9% on Wind-Down Process Update, $750M Share Repurchase Program

Shares of Zillow Group (ZG) rose 9.1% in the extended trading session on Thursday after the American online real estate marketplace company provided an update on its wind-down process. Additionally, the company’s Board has authorized the repurchase of up to $750 million of its common stock.

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Details of Wind-Down Process

In November, the company disclosed its plan to wind down its Zillow Offers operations and provided a Q4 outlook. Taking into account the current wind-down progress, Zillow has updated its Homes segment revenue outlook for the fourth quarter of 2021 to a range of $2.3 billion to $2.9 billion, up from the $1.7 billion to $2.1 billion range.

Furthermore, the net impact of the Zillow Offers wind-down of its inventory (including inventory losses), operating costs, and restructuring costs are anticipated to be cash-flow neutral. Notably, this includes the repayment of all Zillow Offers secured debt, which stood at $2.9 billion as of September 30, 2021.

Zillow Group CFO Allen Parker said, “We will continue to be disciplined in our inventory wind-down strategy and evaluate a variety of options to best optimize net cash flows to the company.”

Share Repurchase Program

Zillow’s repurchase authorization worth $750 million includes the buyback of its Class A common stock, Class C capital stock, or a combination of both. (See Zillow Group stock charts on TipRanks)

Wall Street’s Take

Recently, Stifel Nicolaus analyst Scott Devitt reiterated a Hold rating on the stock and decreased the price target to $85 (58.1% upside potential) from $105.

Devitt said, “In 2021 / 2022, Zillow faces potential macroeconomic headwinds from a slowing housing market following 2020’s rebound from pandemic lows, rising interest rates, and intensifying competition. Additionally, Zillow’s recent announcement to unwind Zillow Offers, its 3.5-year iBuying venture in which it buys and sells homes, could potentially transform the company’s business model and risk profile in the years ahead.”

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Consensus among analysts is a Hold based on 6 Buys, 9 Holds, and 2 Sells. The average Zillow Group price target of $90.60 implies 68.5% upside potential to current levels. Shares have decreased 51.6% over the past year.

Website Traffic

TipRanks’ Website Traffic Tool, which uses data from SEMrush Holdings (SEMR), the world’s biggest website usage monitoring service, offers insight into Zillow Group’s performance.

According to the tool, Zillow Group’s website recorded a 13.99% decline year-over-year in global visits in October. In contrast, year-to-date website growth compared to year-to-date website growth in the previous year came in at 18.03%.