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Is Zillow a Value Stock?

Managing to snag NASDAQ’s (NDAQ) first one-letter ticker symbol, Zillow (Z) found investors quite interested in a piece of its pie on day one of its trading. Zillow may not be the next Google (GOOG), but there are certainly some very exciting things about this company. Its app on the ever-popular Apple (AAPL) iPhone has caught the eyes of many with its ability to “Zestimate” the value of any home in the United States. In fact, Zillow’s web site is even more comprehensive, but skeptics are quick to point out that this company has not even turned a profit yet. Others are just happy that the stock’s IPO didn’t flop like a certain Internet radio web site (P).

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A tepid housing market was thought to be one factor that could negatively affect Zillow, but the company may actually stand to benefit from the turmoil. Homeowners anxious about their house’s Zestimate will probably continue to fuel traffic for the web site. Revenues mostly come from advertising at the moment, but it is not hard to imagine other ways that Zillow might be able to make money in the future.

Furthermore, the company’s current lack of profitability should not be a concern because it won’t be long before income catches up with costs. Overall, Zillow is definitely a strong company, but it is hard to imagine the stock seeing strong long-term gains after such a big opening day. Similar to the experience of LinkedIn (LNKD), look for the market to revise this stock’s value lower once the dust settles. Note that at a price of a little over $35, the company’s valuation is approximately $950 million.

By Larry Gellar, Lead Editor Investment Underground

About the author:

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Rating: 2.7/5 (22 votes)

Comments

tighanx
Tighanx - 2 years ago
When people are talking about $1B zillow as value stock, the bubble is big enough.

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