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Online Real Estate Sector Update

Posted on Thursday, Dec 5th 2013

According to recent S&P/Case-Shiller Home Price Indices, housing prices in the country rose the fastest in August this year since their bubble in 2006. Another report by Zillow, (Nasdaq: Z) also found that the volume of sales has increased. In 2006, the volume of sale transactions for houses had peaked to 7 million. But the volume is now picking up, and analysts expect to end the current year with more than 5 million transactions. Zillow’s report estimates this number to grow to 7 million by 2018. The real estate sector stocks are already witnessing the impact of this growth as stocks of quite a few of them have more than doubled since the beginning of the year.

Zillow’s Financials

Zillow’s Q3 revenues grew 67% over the year to $53.3 million, ahead of the Street’s estimates of $51.35 million. Loss per share of $0.05 was also better than the Street’s projected loss of $0.08 per share. For now, the company is not focusing on improving margins and instead plans to grow its market share.

By segment, marketplace revenues grew 73% to $40.9 million, driven by 67% growth in real estate revenues which ended the quarter at $35.1 million. Mortgages revenue grew 120% over the year to $5.7 million and Display revenues grew 50% to $12.4 million.

In operating metrics, traffic to the site grew 75% over the year to 63.7 million monthly unique users in August. Average monthly unique users during the quarter grew 69% to 61.1 million. comScore’s report says that Zillow’s audience market share grew to 34% compared with 27% a year ago. Premier Agent subscribers grew 68% over the year to nearly 44,750 at the end of the quarter, and Zillow ended the quarter with average monthly revenue per subscriber of $264.

For the current quarter, Zillow expects revenues of $55 million-$56 million, with adjusted EBITDA of $8.5 million-$9 million. It expects to end the year with revenues of $194 million-$195 million and EBITDA of $23 million.

Zillow’s Mobile Growth

Zillow’s mobile efforts are reaping in good results. During the quarter, visits to Zillow through a mobile device more than doubled. In August 2013, more than 321 million homes were viewed on Zillow using a mobile device. The company claims that nearly 60% of visits occur on a mobile device, and that number increases to more than 70% on weekends. Zillow plans to remain focused on its mobile efforts. Earlier this quarter, it released an upgraded Zillow Real Estate App for iPhone and iPad, which was launched to be in line with the release of Apple’s upgraded iOS7. It also launched Zillow Digs, a new app for the iPhone that lets users browse through photos of interiors of houses. Since its launch earlier this year, the app has amassed a repository of over 1 million photos, 160,000 boards of ideas and decor, and has seen contributions of more than 85,000 photos.

Zillow’s stock is trading at $71.28 with a market capitalization of $2.78 billion. It touched a 52-week high of $103.00 in September 2013.

Move’s Financials

Move’s (Nasdaq:MOVE) Q3 revenues grew 19% over the year to $58.8 million with consumer advertising revenues growing 14% to $45.6 million and software and services revenues growing 41% to $13.2 million. EPS for the quarter remained flat at $0.11.

During the quarter, unique users grew 22% over the year and 18% over the quarter to 28 million.

Move expects to end the current year with revenues of $227 million and adjusted EBITDA of 12-13%.

Move’s Acquisition

During the quarter, Move announced the acquisition of FiveStreet, a lead consolidation services provider. FiveStreet was founded in 2012 to provide a lead consolidation and response tool for real estate professionals. Its software consolidates leads from real estate sites at more than 40 lead providers and prepares an automated workflow for responding, assigning and distributing leads. It also has a unified dashboard that helps keep track of the leads and uses web-based and mobile-based tools for response. The acquisition will help Move strengthen its offerings for agents, teams and brokers as they FiveStreet’s system is already integrated with Agents will be able to speed up their response time and be more efficient by migrating to a single dashboard.

Move’s stock is trading at $15 with a market capitalization of $585.8 million. It touched a 52-week high of $18.36 in October 2013.

Trulia’s Financials

Trulia’s (NYSE:TRLA) Q3 revenues grew 117% over the year to $40.3 million with earnings of $0.19 per share. These results included the financial performance of Market Leader, a company Trulia acquired earlier this year. Excluding the acquisition, Trulia’s revenues would have come in at $33.8 million. The Street was looking for revenues of $37.9 million with EPS of $0.08 from Trulia’s core business.

By segment, Marketplace revenues grew 96% to $24.8 million and Media revenues grew 52% to $9.0 million. Market Leader accounted for $6.5 million in revenues for the quarter.

Among operating metrics, monthly unique visitors for Trulia’s standalone business grew 42% to 35.3 million. Mobile continued to see strong growth, with unique visitors per month growing 88% to 14.5 million. Trulia added over 4,300 subscribers to its service to end with more than 36,400 subscribers generating an Average Revenue Per Premium Subscriber of $186, which was 21% higher than the previous year.

For the current quarter, Trulia projected revenues of $48.5 million-$50 million, ahead of the market’s projections of $48.3 million.

Trulia’s Growth Offerings

Recently, Trulia released new interactive natural hazard maps to help property investors identify areas across the country that are more likely to be impacted by hurricanes, wildfires, and tornadoes. Home buyers will be able to make more informed decisions about buying their homes through these maps.

Trulia is also working on improving its website, and earlier this quarter it announced plans to use SiteSpect for multivariate testing and behavioral targeting. Trulia plans to use SiteSpect’s A/B and multivariate testing technology to help improve the conversion rates on their website. Post this testing, it will be able to improve user interface, site’s visuals, navigation, content and forms. These changes should help the company see benefits in forms of improved customer engagement and loyalty.

Trulia’s stock is trading at $31.55 with a market capitalization of $1.18 billion. It touched a 52-week high of $52.71 in September 2013.


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