Zillow: A Long-Term Story

04/28/2014 7:00 am EST


Michael Cintolo

Vice President of Investments and Chief Analyst, Cabot Heritage Corporation

The global mass movement of every kind of business to the Web has produced many winners, and our latest featured stock—focused on home buying—is a great example, suggests Mike Cintolo, editor of Cabot Top Ten Trader.

Zillow (Z) brings home buyers, home sellers, renters, mortgage lenders, and real-estate professionals together in one marketplace with a wealth of data.

The company gets three-quarters of its revenue from subscriptions and fees associated with its marketplace and the other quarter from display ads.

Zillow is a high-profile company, with an aggressive program of signing up users, including on Facebook and Twitter.

Users can search for houses by location, price, features, and school districts, as well as browse realtors, mortgage lenders, and rates, and even see estimates of the value of their own homes, whether or not they’re on the market.

As of last month, the company boasted 76.5 million unique monthly users in March, up from 50.3 million a year ago.

The gradual improvement in housing and lending markets has been a big boost to the company’s business, with revenue up 77% in 2012 and 69% in 2013.

There aren’t many surprises in the Zillow business model, just a wealth of reliable data that attracts potential buyers and sellers and lets them make contact with service providers.

Z came public at $20 in July 2011 and tripled in value in its first week of trading, and soared above $100 by September 2013. This is a very volatile stock. But it’s holding in its trading range and looks buyable right here if you like the long-term real-estate story.

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