Zillow Group, Inc. (Ticker Symbol: ZG) reported disappointing numbers this quarter that sent the stock sliding lower. The online real estate company reported that it lost more money in the second quarter of this year than it did in all of 2018. Zillow spent $240.7 million attempting to boost its home segments business. The company is also expanding its Zillow Offers division, a company Zillow founded to become an actual buyer and seller of homes, not only an online platform to buy and sell homes on. Zillow purchased more than 1,500 homes last quarter, while only selling roughly half of that number. The purchases show a increase of over 70% from the previous quarter and the sales number reported has doubled.
Above is the intermediate-term chart of Zillow’s stock price over the past three and a half years. The stock started off 2016 negatively and then put in a V-shaped reversal in the first quarter of that year. At that point, the stock took off, rallying over 150% from low to high. Zillow spent the next 10 months trading within a horizontal channel in between the price ranges of roughly $30.00 and $40.00. Horizontal Channels are viewed as continuation patterns and are usually areas of indecision between buyers and sellers. Usually, the stock is a point at which supply and demand are relatively balanced and price trades within a certain range. The same highs and lows are tested multiple times within the Horizontal Channel. Zillow broke out of this channel in the second quarter of 2017 led by a strong earnings and guidance report.
The stock then proceeded to trade strongly over the next 14-months, rallied over 60%, and ticked to an all-time high of $65.70 on June 15th, 2018. However, the stock took an unfortunate turn for its shareholders and began to sell off at the beginning of the third quarter of 2018. Zillow broke below its uptrend from the past two years and began to trade below both its 100 and 200-Day Moving Averages. The stock began to bottom at the start of 2019 around the $28.00 price level. Zillow was having a positive start to 2019 so far but has seen negative times recently and the stock is currently trading below both its 100 and 200-day Moving Averages yet again.
(Chart above courtesy of www.tipranks.com)
Based on a survey of 13 analysts offering 12-month price targets, the average price target for Zillow’s stock is $49.00. According to that number, the stock is priced at a discount relative to Wall Street’s analysts and could be considered undervalued around current levels near $37.44.
Technically, Zillow has been under pressure the past few years but seems as if it is trying to expand and grow its Zillow Offers business. Currently, Zillow is greatly underperforming the real estate sector, which is up over 20% year to date. Investors in the company should look to Zillow’s earnings release on November 6th for fresh news within the real estate sector.