Zillow ($ZG) – Straying Way Too Far

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Is House-Flipping A Sound Business Model? 

In the early stages of a booming economy and housing cycle with low-interest rates, one could probably do quite well.

In the late stages of the economic and housing cycle, you will be left holding the bag at some point.

I remember the 2008 real estate bubble all too well.

The damage left behind and the destruction in values was truly remarkable.

So why would the smart team behind Zillow decide to stray and get into the house-flipping game? They feeling a bit desperate and need a new story to justify the 88 Price Earnings Ratio?

Online real estate listing company Zillow Group — which owns Zillow as well as Trulia — is expanding its so-called “Instant Offers” program to Phoenix and Las Vegas. Made available in Orlando early last year, the company’s arm that outright buys and sells real estate (rather than just listing it for agents and buyers) is expanding in a way that suggests Zillow intends to continue with the new plan. The aim is to turn a profit by selling these homes for more than the price at which Zillow Group buys them – Flipping.

It’s certainly a departure from the current Zillow business model, which is selling ads, and selling realtors rights to make for-sale properties “featured” on its websites.

Zillow says it intends to own between 500 and 1000 houses before the end of the 2018.

Bottom line? 

Zillow will report Q2 August 06, 2018. We have no idea (nor do any analysts) if the earning will be good, bad or expected.

Trading at about 90 times earnings – Zillow needs a good haircut.

Any whiff of bad news, and Zillow will get whacked.

52 Week   High: $65.42      Low: $37.96

The shares closed today at $62.50.

We see the shares trading down to $25.00 by the end of 2019.

Get short.

Enjoy!

 

 

 

 

 

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Contrarian's Mind

Born in Toronto Lived in Nassau,Bahamas - Palm Beach,Florida - Las Vegas,Nevada and now residing in beautiful Barcelona,Spain. I back bright entrepreneurs with big ideas related to Artificial Intelligence, Machine Learning, realtime platforms and price discovery. Make everyday remarkable!

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