Roughly 94% of Zillow‘s (NASDAQ:Z) shares were in short positions ahead of the real estate website’s third-quarter report Monday evening.
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.