Online real estate marketplace Zillow (NASDAQ:ZG) announced better-than-expected revenue in Q3 CY2024, with sales up 17.1% year on year to $581 million. Its non-GAAP profit of $0.35 per share was also 20.1% above analysts’ consensus estimates.

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Zillow (ZG) Q3 CY2024 Highlights:

• Revenue: $581 million vs analyst estimates of $555.2 million (4.7% beat)

• Adjusted EPS: $0.35 vs analyst estimates of $0.29 (20.1% beat)

• EBITDA: $127 million vs analyst estimates of $107.6 million (18.1% beat)

• Q4 revenue guidance of $532.5 million, in line with expectations

• Q4 adjusted EBITDA guidance of $97.5 million, below expectations

• Gross Margin (GAAP): 75.9%, down from 77.8% in the same quarter last year

• Operating Margin: -7.7%, up from -10.7% in the same quarter last year

• EBITDA Margin: 21.9%, in line with the same quarter last year

• Free Cash Flow Margin: 33.9%, up from 8.1% in the same quarter last year

• Market Capitalization: $14.4 billion

Company Overview

Founded by Expedia co-founders Lloyd Frink and Rich Barton, Zillow (NASDAQ:ZG) is the leading U.S. online real estate marketplace.

Real Estate Services

Technology has been a double-edged sword in real estate services. On the one hand, internet listings are effective at disseminating information far and wide, casting a wide net for buyers and sellers to increase the chances of transactions. On the other hand, digitization in the real estate market could potentially disintermediate key players like agents who use information asymmetries to their advantage.

Sales Growth

A company’s long-term performance is an indicator of its overall business quality. While any business can experience short-term success, top-performing ones enjoy sustained growth for multiple years. Zillow struggled to generate demand over the last five years as its sales were flat. This is a tough starting point for our analysis.

We at StockStory place the most emphasis on long-term growth, but within consumer discretionary, a stretched historical view may miss a company riding a successful new product or emerging trend. Zillow’s annualized revenue growth of 2.4% over the last two years is above its five-year trend, but we were still disappointed by the results.

This quarter, Zillow reported year-on-year revenue growth of 17.1%, and its $581 million of revenue exceeded Wall Street’s estimates by 4.7%.

Looking ahead, sell-side analysts expect revenue to grow 11.6% over the next 12 months, an improvement versus the last two years. Although this projection shows the market believes its newer products and services will spur better performance, it is still below average for the sector.