Zillow Group Inc. (Z, Financial) posted a much lowered than expected first-quarter revenues resulting in 1% fall in shares at $97.34 in after hours trading. Surprisingly, the profits rose whereas revenues fell lower than the market expectations. Nevertheless, the company is keeping its hopes intact on projected $690 million for 2015 as well as a forecast for second-quarter revenue between $168 million to $169 million. Shares had risen to $103.50 before falling back. Combining results of Trulia (TRLA, Financial) with Zillow, the company’s pro forma loss has been recorded at 31 cents per share in the current quarter as compared to 42 cents per share loss at the same time last year.
Quarter results
Zillow Group Inc. posted heavy losses including a net loss of $58.4 million or $1.19 per share for the current quarter as compared to last year’s loss of $6.3 million or 16 cents per share. Excluding special items, profits were up by 5 cents a share from 2 cents per share. Revenues also saw a rise of 92% to come at $127.3 million.
Hopes from Trulia
The San Francisco-based Trulia is an online residential real estate site for home buyers, sellers, rentals and real estate professionals in the United States. Zillow, on the other hand, is an online real estate database company, which was founded in 2005 by Rich Barton and Lloyd Frink who were the former employees of Microsoft (MSFT, Financial) group and had also founded Expedia (EXPE, Financial), a Microsoft spin-off.
Considering the mutuality in the businesses of the two companies, Zillow offered a merger, though it wasn’t a smooth ride due to some adjustments that includes reducing Trulia’s reliance on banner ads promising to improve the website and attract more users, but instead led to revenue losses. Zillow did the acquisition of Trulia in a $2.5 billion stock swap, which was completed in February. The pro forma earnings for 2015 have been estimated to be $80 million to $85 million before interest, taxes, depreciation and amortization as well as pro forma revenue of $690 million. This is way below analysts’ expectations.
Lead in the market
Both Zillow and Trulia have been getting positive feedback from the market with 75.4 million unique visitors reported for both in the month of March, as per survey by comScore Inc. (SCOR, Financial). The score helped the combined companies take a strong lead in the market with the online home-listing service, the Realtor.com network, falling back to second position with 32.6 million unique visitors in the same month. Market analysts are recommending shares of Zillow citing benefits coming up from younger real-estate customers who use mobile sites. The brand of the company has been performing well on mobile devices stating the occurrence of almost two-thirds of the use of its Zillow brand on mobiles.
Positive approach
Despite losses, the company is positive towards its future outlook as well its favorable association with Trulia. The company is hopeful of “combined team to execute extremely well across all brands and marketplaces.” Going forward Zillow plans to grab a good hold on to the residential advertising market, which is worth $10 Billion to $12 Billion.
