Zillow took a tumble earlier this week, but shares are back up again today trading up more than seven percent at $26.24 per share. (As we previously reported, there’s a real desire for Zillow insiders to keep the stock above $25).
The real test for the company will come after the markets close today as the Seattle online real estate firm reports financial results for the first time as a publicly-traded company.
Financial reports like today’s — especially this early in a company’s history — can help set the tone of the investment community. A good one, and investors could send the stock soaring. A bad one: Well, just look at what happened to Motricity — the last Seattle area company to go public before Zillow — when it disappointed Wall Street earlier this month.
Here are a few of the key things to look for as CEO Spencer Rascoff and CFO Chad Cohen field calls today from analysts.
In an interview with GeekWire last month, Rascoff noted that Zillow has been cash-flow profitable and EBITDA profitable for three quarters. But the company has not yet shown net income profit. Could this be the quarter? Wall Street certainly would like to see the company swing to profitability. As we’ve pointed out in the past, the company is awfully close. In the last quarter, Zillow’s net loss was just just $827,000. Will the company swing into the black?
Many forget that, for the most part, Zillow is an advertising-based business. And one key metric to watch will be whether the company is meeting with success in adding new “premier agents.” Those agents are especially important to Zillow since they pay a monthly fee to participate in the advertising program, creating a more reliable revenue stream. At the end of March, Zillow boasted 10,710 premier agents in the program. We will be looking to see where that number ends up this quarter.
3. FINDING EYEBALLS
Because Zillow is an advertising-based business, it lives and dies by how many people are visiting the site (and for how long). One of the criticisms of Zillow is that people primarily use it when they are shopping for homes, forgetting about it until the next big real estate transaction. The company was averaging about 17.3 million visitors to its Web site and mobile apps for the three months ended March 31, an 86 percent increase over the same period in 2010. Did those numbers continue to climb at a reasonable clip during the third quarter?
4. REAL ESTATE INDUSTRY MALAISE
The turbulence in the economy, and real estate sector generally, has an impact on Zillow’s business. A booming real estate industry could spark more advertising spending on Zillow, something that Rascoff alluded to in our interview last month. ”I believe that we would be even more successful in a more positive housing climate,” he said. Today’s call will be a good chance to hear how the executives — who sit on mountains of real estate data — feel things are progressing.
5. A SURPRISE
Could Rascoff and crew use the occasion of the first financial report to roll out a new service? It would be a bold move, and my guess is that the executives will choose not to surprise Wall Street with a new offering at this juncture. However, it could be interesting if Zillow came out of the gate with a new partnership under its belt, a new product offering or, even an acquisition. The company’s July IPO generated more than $85 million, so how is the company going to use some of that cash? (Note: The company’s announcement today of a Windows Phone 7 app isn’t on the grand scale that we are talking about in terms of surprises).
Anyway, that’s what I’ll be looking for in today’s call with Zillow execs. What do you think will be important to watch for?