The Challenges Zillow Faces in Its Homebuying Business
Zillow Group (NASDAQ: ZG) (NASDAQ: Z) recently reported fourth-quarter results that beat Wall Street analysts' expectations. However, its adjusted EBITDA fell from $32 million in Q4 2018 to a loss of $3 million, despite a 158% increase in revenue. How could Zillow go from profitability to losses with that sort of increase in revenue? The answer to that question is: the homebuying business, which is largely Zillow Offers.
The real estate database company has made a bet that it can disrupt the way people buy and sell homes. Its Zillow Offers business buys homes, makes necessary renovations, stages them for sale, and then sells them in the market. Zillow's bet is that at least some sellers will be willing to pay more for a fast, convenient transaction. In competitive real estate markets, what Zillow offers will often be more attractive to a seller than the standard home-selling process.
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Source Fool.com
