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Zillow (Z) Q4 2021 Results

Andre Harrer | Bloomberg | Getty Images

Zillow shares soared as much as 20% in extended trading on Thursday after the digital real estate company said it was exiting the home flipping business faster and more economically than it had expected previously.

Zillow’s fourth-quarter earnings report follows a dire streak for the company after it attempted to break into the iBuying, or instant buying, market in which it purchased homes directly from homeowners. Zillow said in November he was leaving the company, admitting his algorithms could not accurately predict house prices, putting the entire company at risk.

The company lost $261 million in the fourth quarter and $528 million for the year, with the entire deficit attributable to residential activity. But Zillow said it sold 8,353 homes during the period, beating its outlook by about 5,000 sales, and ended the quarter with about 10,000 homes in inventory.

“We have made significant progress in our efforts to end our iBuying business – selling homes faster than expected with better unit economics than we anticipated,” Zillow CEO Rich wrote. Barton, in the quarterly letter to shareholders. “We are even more convinced today that leaving iBuying and eliminating the property market’s balance sheet risk for our company and our shareholders was the right decision.”

At the time of the announcement in November, Zillow also said it was cutting about 25% of its workforce.

Due to the faster pace of home sales, revenue of $3.88 billion for the fourth quarter beat analysts’ average estimate of $2.98 billion, according to Refinitiv. More than 85% of revenue comes from the iBuying division, with the rest generated by its real estate advertising group, called Internet, Media and Technology (IMT).

IMT revenue rose 14% to $483.2 million in the fourth quarter, narrowly beating the average estimate of $481.9 million, according to FactSet.

For the first quarter, Zillow expects total revenue of $3.12 billion to $3.44 billion. Analysts had forecast revenue of $3.26 billion.

Zillow is once again focused on the marketplace, connecting buyers and sellers with tools and technology to simplify the process. This includes working with an extensive network of agents and helping consumers with their mortgages.

The company expects this to translate to $5 billion in revenue by 2025 and an adjusted profit margin of 45%.

“We want to acknowledge that the past few months have been difficult for all of us – Zillow executives, employees and investors,” Barton wrote. “But innovation is a bumpy road.”

The stock climbed as high as $59.04 after hours. As of Thursday’s close, it was down 24% this year.

LOOK: Zillow can have sustainable profitability

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