Zillow’s stock is down 51% this year, including a 22% drop on Wednesday after it exited the iBuying business. (Source: Google)

Zillow Group co-founder and CEO Rich Barton admitted on Tuesday that it was a “tough day” when the powerhouse real estate tech company announced plans to exit the home flipping business, a move that will result in the layoffs of about 2,000 people.

On Wednesday, the reverberations of the decision — driven by Barton’s lack of faith in the company’s home buying models — were felt deeply on Wall Street.

Shares of Zillow fell by 22%, shedding $19.60 per share on Wednesday, to close at $65.88.

Zillow CEO Rich Barton. (Zillow Group Photo)

The stock plunge erased much of the gains the company experienced during the pandemic when Barton routinely discussed how the “great reshuffling” was changing behaviors related to home ownership. Zillow’s stock — down 51% on the year — is still above its pre-pandemic levels, when it was trading for around $40 per share.

But if Wall Street keeps bailing, then those gains also may be chopped. The good news? The stock is up 88% since it went public just over ten years ago.

Other companies in the iBuying arena also were impacted by the Zillow news.

Not all investors are bailing on Zillow.

The ARK Innovation ETF led by Cathie Wood bought 288,813 shares of Zillow on Tuesday, according to The Wall Street Journal. UPDATE: A report by Seeking Alpha on Wednesday indicated that Wood’s firm sold about 2.85 million of Zillow shares, a quick turnaround from Tuesday’s position.

RELATED: Why the iBuying algorithms failed Zillow, and what it says about the business world’s love affair with AI

In a research note to clients, RBC Capital Markets revised its price target on Zillow’s stock to $100, but didn’t downgrade the shares.

Why?

The research analysts at the firm — echoing the sentiment of Barton on Tuesday’s earnings call — noted that Zillow’s “asset-light” Premier Agent business is growing fast and is “not fully appreciated at current levels.” That business grew by 20% year-over-year in the third quarter, generating $359 million in revenue.

It may have been overshadowed by headlines around the closure of the iBuying business and layoffs, but Zillow still sits in an enviable position with 220 average monthly users and $3.2 billion in cash and investments.

RBC wrote:

“Downgrading here would ascribe no chance for success of either alternative ways for (Premier Agent) to grow beyond core buy-side leads and/or Zillow’s ability to layer on other ancillary revenue. In particular, we expect the company to get much more proactive with Zestimate as an engagement tool to unlock seller introductions, the expanding product suite (mortgage, title, escrow, closing services) carry both buy and sell-side engagement tailwinds over time and finally, we think the new asset-light approach could unlock new partnership opportunities for cross-pollination of Zillow’s user base with other companies’ capital.”

Meanwhile, investment firm Wedbush wasn’t as bullish and noted that Zillow will have work to do in order to rebuild trust on Wall Street.

Zillow still intends to pursue the Zillow 2.0 strategy but in a more “asset-light” way. The vision needs to be rebuilt and in light of how iBuying transpired, management will need to rebuild credibility that it can successfully implement that vision over time…. The idea is that a more open suite of products can continue to drive the flywheel, if not do a better job than iBuying. Maybe it will… but it will need time to develop.

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