(Bloomberg) -- Zillow Group Inc. shares fell as much as 12% in after-market trading after the company’s guidance for third-quarter adjusted earnings before interest, taxes, depreciation and amortization missed analyst estimates.

  • The home-search company is projecting third-quarter adjusted Ebitda between an $18 million loss and a $2 million gain. That compares to a consensus estimate of $17 million. The company forecasts losses of between $70 and $80 million in its home-flipping business.

Key Insights

  • The company generated $249 million in revenue from Zillow Offers, an algorithm-driven spin on home-flipping, and $324 million from the segment that includes the advertising business, exceeding company forecasts on both fronts.
  • Zillow has been racing to expand against a crowded field of data-driven home-flippers, sometimes called iBuyers. That includes Softbank-backed Opendoor, which pioneered the business model and operates in 23 markets. Opendoor said in July it was selling homes at a run-rate of $5 billion a year. Zillow started buying homes in Nashville, its 15th market, earlier this month, and is buying homes at a rate of $1 billion a year.
  • Going forward, Zillow will need to show that it turn a profit in the capital intensive, low-margin business of flipping homes. IBuyer has found that consumers are willing to sell their homes at a small discount in exchange for the speed and certainty of selling their home over the internet. When fees rise too far beyond what traditional brokers charge, sellers return to traditional brokers. Zillow reported a $56.5 million loss before interest, taxes, depreciation and amortization in its Homes segment, which includes Zillow Offers.
  • Zillow shares had increased by 45% since its last earnings report in May through the close of trading today, when the company’s better-than-expected revenue from Zillow Offers highlighted the benefits to the company’s ongoing transformation. Those results, combined with co-founder Rich Barton’s return to the role of chief executive officer, have gotten a lot of attention. Perhaps more importantly, real estate agents have stopped defecting from its advertising platform.

Get More

  • Click here to read Zillow’s earnings statement.

To contact the reporter on this story: Patrick Clark in New York at pclark55@bloomberg.net

To contact the editors responsible for this story: Debarati Roy at droy5@bloomberg.net, Rob Urban

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