Shares of housing tech companyZillow Group(NASDAQ: Z)(NASDAQ: ZG) jumped as much as 13.5% in early trading on Wednesday after the company reported fourth-quarter 2023 financial results. Shares closed trading up 7.8% for the day.
Zillow's steady progress
The headline numbers weren't all that impressive for Zillow. Revenue was up 9% to $474 million, beating the $451 million analysts expected, and net loss was $73 million.
On an adjusted basis, which pulls out one-time expenses and stock-based compensation, earnings were $0.20 per share, topping the $0.12 that Wall Street expected.
What was most impressive was Zillow's growth in rentals. Revenue was up 37% in the rental segment to $93 million and multifamily revenue was up 52%. If Zillow is going to build a "housing super app" it's going to need to grow in rentals and this is a strong sign the strategy is working.
More work ahead for Zillow
These are steps in the right direction for Zillow, but the company has a lot of work to do to build a profitable business with a large moat. The traditional real estate broker industry is still very ingrained in most markets and Zillow is still an advertising platform for most people in the industry. But it's possible that growing market share enables growth in other business models like listing homes directly or finding movers, insurance, inspectors, and more right on Zillow.
I think this was a small, but important, step for Zillow and this is the kind of company I want to hold for decades. But keep in mind that the long journey to creating value for Zillow will likely take years in the very slow-moving housing market.
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Travis Hoium has positions in Zillow Group. The Motley Fool has positions in and recommends Zillow Group. The Motley Fool has a disclosure policy.
