Shaina Mishkin

Sales are on the rise at Zillow Group. But it wasn't enough for investors, who sent the stock falling after the market closed Tuesday.

Zillow's fourth-quarter results were better than analysts had anticipated, but its first-quarter guidance fell short of expectations, according to FactSet. Zillow class C shares were down 7.5% in after-hours trading after closing 1.8% lower on Tuesday.

The company reported fourth quarter adjusted earnings before interest, taxes, depreciation, and amortization, or Ebitda, of $112 million on $554 million in revenue, surpassing the $108 million in Ebitda on $547 million in revenue that analysts had expected. It reported $498 million in Ebitda on $2.2 billion in revenue for the full year, in line with expectations.

"We achieved our stated goals for the year -- including double-digit revenue growth -- and we expect to keep up our momentum in 2025," CEO Jeremy Wacksman said in a statement.

Zillow expects revenue in the first quarter in a range from $575 million to $590 million, shy of expectations calling for $600 million, according to FactSet. It expects adjusted Ebitda in a range from $125 million to $140 million, lower than the $158 million consensus expected.

Heading into earnings, expectations were high for the company best known for its home listings portal. "Z has delivered upside in the past 12 quarters, a track record we see continuing in 4Q as revenue benefits from a stronger housing market and product expansions," a team of Jefferies analysts led by John Colantuoni wrote in a Feb. 3 note. They increased their price target to $110 from $105 and reiterated a Buy rating.

But softer-than-expected guidance was a possibility, they added: "We see some risk of 1Q guidance falling slightly below consensus, driven by a slower housing market YTD [...] and Z's tendency to guide conservatively."

Political developments could represent additional headwinds. "We remain cautious on the housing market outlook in the near term, given the Fed has paused its rate cutting cycle and home prices continue to increase, with the potential for tariffs to further exacerbate affordability issues," Canaccord analyst Maria Ripps wrote in a Feb. 6 earnings preview. She rates Zillow Class A shares Hold, with a $86 price target.

Zillow is best known for its home listings portal, but has been building out its services offerings for renters, sellers, buyers, and agents. The company "is delivering value to movers and real estate professionals with our products and services, and that's translating to strong performance across our business," Wacksman and CFO Jeremy Hofmann wrote in a letter to investors accompanying its earnings release on Tuesday.

The company's fourth-quarter revenue rose 17% from the year prior, beating expectations.

Revenue rose across the board -- but the largest gain was in its mortgages business, a jump the company attributed to a 90% increase in purchase loan origination volume. Residential revenue rose 11% to $387 million. Rentals revenue increased 25% to $116 million, and mortgage revenue climbed 86% to $41 million.

In 2025, Zillow aims to reach positive net income on a generally accepted accounting principles, or GAAP, basis. It's "an important milestone for the company," the executives wrote in the letter. The company reported a net loss of $52 million for the fourth quarter, and a loss of $112 million for 2024.

High mortgage rates and relatively few home sales could be headwinds this year. "The housing market looks to remain very challenged in 2025," Wacksman said in an interview with Barron's, adding that the company expects to grow its revenue by 10% at the midpoint against a flat housing market in the first quarter. "Revenue will accelerate modestly through the year," he added, "but we also expect the housing market to get a little better."

Corrections & Amplifications

Analysts expect Zillow to report $600 million in revenue in its first quarter. An earlier version of this article incorrectly said the estimated revenue was $938 million.

Write to Shaina Mishkin at shaina.mishkin@dowjones.com

This content was created by Barron's, which is operated by Dow Jones & Co. Barron's is published independently from Dow Jones Newswires and The Wall Street Journal.

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February 11, 2025 16:37 ET (21:37 GMT)

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