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Zillow Shares Jump as Hot U.S. Housing Market Drives Results

Zillow Group Inc. blew past expectations in the second quarter, doubling the number of houses it purchased for its home-flipping business and setting bullish expectations for third-quarter revenue.

The company had adjusted earnings before interest, taxes, depreciation and amortization of $183 million, according to a statement Thursday, topping the average analyst estimate of $133 million.

Shares gained in late trading. The stock had fallen 19% this year through Thursday’s close, after nearly tripling in 2020.

The results reflected an obsession with real estate in the U.S. that drove a monthly average of 229 million users to the company’s websites and apps, as well as enthusiasm for Zillow Offers. In that business, Zillow uses its number-crunching prowess to bid on homes, makes light repairs, and puts the properties back on the market. It charges sellers a fee for the transaction.

The growth of Zillow Offers is “a nod to how dreadful, frightful and feared the selling process is,” Chief Executive Officer Rich Barton said in an interview. “The further we get into it, the more blue ocean I see.”

The company said it will post $2 billion in consolidated revenue next quarter, up from $1.3 billion in the three months ending in June. The optimistic guidance came with a caution flag for investors. Zillow predicted that margins in its advertising business would decline. It also predicted growing losses from Zillow Offers.

Zillow bought 3,805 homes in the second quarter, posting a $29 million loss for the segment. That was a slight improvement from the first three months of the year, as the company lowered renovation costs and benefited from home price appreciation in the time between when it buys homes and resells them.

Source: Bloomberg