Roughly 94% of Zillow‘s (NASDAQ:Z) shares were in short positions ahead of the real estate website’s third-quarter report Monday evening.
Good call.
Zillow stock was being slammed by roughly 18% Tuesday amid a decent report that was followed up by disappointing guidance.
The company’s third-quarter performance actually was strong. Revenues rose by 67% to $31.9 million, and Zillow turned a profit of $2.3 million, or 7 cents per share — up from a loss of $570,000, or 2 cents per share, in the year-ago period. Revenues slightly edged analyst expectations for $31.7 million, while profits were right on target.
Zillow continues to attract a large amount of traffic, with average monthly uniques increasing by 49% to 36.1 million. The mobile business also has been a huge driver — for the first nine months of 2012, there have been more than 1 billion views of homes across the company’s apps.
Where Zillow got bit was on weak guidance. For Q4, the company expects revenues of $30 million to $31 million, which fell far shy of consensus estimates for $33 million. As for the full year, Zillow is looking for $133 million, or $2 million lower than analyst expectations.
Seasonality is a little to blame for a weak Q4, as sales volume for real estate transactions naturally falls off in Q4. But Zillow also is in the midst of a transition from advertising to lead-based revenues. To this end, the company recently launched its foreclosure platform, which has meant the loss of Foreclosure.com as a sponsor.
Zillow’s strategy is a smart one, but is likely to result in lighter revenues — at least for the next couple quarters.
Tom Taulli runs the InvestorPlace blog IPOPlaybook, a site dedicated to the hottest news and rumors about initial public offerings. He is also the author of “How to Create the Next Facebook.“ Follow him on Twitter at @ttaulli. As of this writing, he did not hold a position in any of the aforementioned securities.
A long-time follower of the IPO scene, back in 1999 Tom started one of the first sites in the space called WebIPO. It was a place where investors got research as well as access to deals for the dot-com boom. Tom also wrote the top-selling book, Investing in IPOs. In it, he covers all the aspects of analyzing an IPO, such as reading the prospectus, detecting the risk factors and understanding some of the arcane regulations. But don’t worry — if that process is too intimidating for you, thankfully Tom will do the legwork for you right here in the IPO Playbook blog.
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