What Happened?
Shares of online real estate marketplace Zillow (NASDAQ: ZG) fell 15.1% in the afternoon session after the company reported mixed fourth-quarter results that left investors concerned despite beating on the top and bottom lines. While the online real estate marketplace's revenue of $654 million and its GAAP profit of $0.01 per share both topped Wall Street's expectations, other key metrics pointed to underlying weakness. The company's adjusted EBITDA, a measure of operational profitability, came in at $149 million, slightly missing the consensus estimate of $151.5 million. Furthermore, Zillow's free cash flow margin saw a sharp decline, falling to 6.7% from 15.9% in the same quarter last year, raising concerns about its cash generation efficiency. This combination of a slight miss on adjusted EBITDA and a significant drop in cash profitability appeared to outweigh the headline beats, driving negative investor sentiment.
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What Is The Market Telling Us
Zillow’s shares are somewhat volatile and have had 14 moves greater than 5% over the last year. But moves this big are rare even for Zillow and indicate this news significantly impacted the market’s perception of the business.
The biggest move we wrote about over the last year was 12 months ago when the stock dropped 14.9% on the news that the company reported disappointing fourth-quarter quarterly results as it provided quarterly guidance for sales and EBITDA below Wall Street's expectations. Management anticipates a challenging housing market in the first quarter of the year (2025) as investors continue to wait for a recovery. Notably, the outlook assumes industry growth will stay flat. On the other hand, Zillow beat analysts' revenue and EBITDA expectations this quarter. However, the weak outlook is weighing on shares and keeping investors cautious. Overall, this quarter could have been better.
Zillow is down 30.9% since the beginning of the year, and at $45.35 per share, it is trading 47.7% below its 52-week high of $86.76 from September 2025. Investors who bought $1,000 worth of Zillow’s shares 5 years ago would now be looking at an investment worth $226.08.
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