One day before
is set to release its earnings, shares of the real estate firm tumbled amid worries about its homebuying program, Zillow Offers.
Zillow Offers aims to sell 7,000 homes for $2.8 billion, Bloomberg reported Monday, citing people familiar with the matter.
Should Zillow (ticker: Z) sell those homes for that price, the price per house would be about $400,000. Last quarter, Zillow sold 2,086 homes for an average price of $370,100, according to a Securities and Exchange Commission filing. If Bloomberg’s report is correct, Zillow has nearly doubled its home inventory as of last quarter, according to figures in its second-quarter shareholder letter.
Zillow declined to comment to Barron’s regarding Bloomberg’s report.
Shares of Zillow, which had fallen nearly 6% before the report was published, fell further after Bloomberg’s article surfaced. The stock recovered from its intraday low to close down 6.3% to $97.42.
The Bloomberg report follows mid-October news that the company would pause home purchases through its Zillow Offers program, also known as its iBuying program, through 2021. The company at the time cited operational constraints and its renovation backlog.
In the weeks that followed, several analysts covering the company’s shares lowered their price targets on the stock. The average target price for Zillow’s Class C stock is currently $142.37, down from $160.32 at the end of September, according to FactSet.
Analysts have continued to weigh in negatively on the stock. In a note published Sunday, KeyBanc Capital Markets analysts expressed concerns beyond operational constraints. The team said they conducted an analysis of 650 homes and found that 66% were listed below Zillow’s purchase price. “Zillow may have leaned into home acquisition at the wrong time, and we believe earnings may be at risk due to its current homes inventory,” wrote analysts Edward Yruma, Abigail Zvejnieks, Samantha Hanley, and Kenny Temsupasiri.
Zillow didn’t immediately respond to a request for comment on the report.
Other analysts have raised concerns about Zillow’s market share. In a note published early last week, Wedbush analysts downgraded the company’s
Class A shares
(ZG) to Neutral from Outperform, noting that the company could surrender iBuying market share to competitors like
(ticker: OPEN), another company that buys and sells homes.
Investors bid up shares of the Zillow’s iBuying competitor on Monday. Opendoor stock closed 4.4% higher.
These reports will be another reason to watch Zillow’s third-quarter earnings report Tuesday after the market close.
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