Zillow Sees Opportunity in a New Generation of Homebuyers
Zillow Group (NASDAQ: Z)(NASDAQ: ZG), has been on a rollercoaster ride in 2019 as investors question the scalability of its homebuying and selling initiative, Zillow Offers. While it's outpacing revenue expectations, its profitability has come under intense scrutiny; the segment loses $0.25 for every dollar in revenue it brings in. However, the demand for Zillow Offers cannot be ignored, and the long case for Zillow is a broader story. As Zillow Offers grows, Zillow will not just be flipping houses. It stands to become the largest online real estate marketplace in the US.
Zillow's Offers service stands ready to capitalize on a wave of new homebuyers. Source: Getty Images.
In Zillow Offers, the company goes directly to consumers and makes cash offers for the sale of their homes. With just a few clicks and a few days' time, sellers can go from initial request to a sold home. In just over a year, Zillow has grown the division to over a $1 billion annual run rate. While Offers comes with some challenges -- managing home repairs, sensitivity to interest rates, and turning over an inventory of homes -- management believes they can reach adjusted EBITDA margins of 2% to 3% of each home transaction at scale.
Source Fool.com
