With interest rates low and the economy recovering, many investors want to play a rebound in the housing market. Why not look at a few Internet plays that are directly correlated to housing?
Yesterday, real estate website Zillow (Z) beat the consensus earnings-per-share estimate by $0.02 on a 72% increase in revenue. Fourth-quarter sales of $34.2 million was $2.85 million ahead of expectations. Management guided investors to expect fiscal 2013 revenues up 36%, to between $165 million and $170 million (vs. the previous estimate of $159 million.)
In after-hours trading, investors jumped for joy and the shares rose 12%. With 45.9 million users, January was a record month. Average monthly unique users grew 47% year over year to 34.5 million. More than half of Zillow's traffic now comes from mobile devices.
It wasn't all high-fives, though. Management told investors to expect to expect its earnings before interest taxes and depreciation to be flat to slightly down, as the company plans to increase its marketing spend by 70% in 2013. Zillow recently lost its largest advertiser, Foreclosure.com, and it wants to juice up the marketing spend in order to accelerate the company's growth. Zillow added 2,770 new real estate agents to its Premier Agent program. The company now boasts more than 29,000 agents paying for premium advertising space.
But, with Zillow shares up some 47% in the last three months, investors who are sensitive to things like valuation might want to look at Move.com (MOVE) or Trulia (TRLA). Move.com has the weight of Realtor.com behind it, which some say make homebuyers linger on the site longer. Trulia lags both sites in terms of home listings, traffic, real estate agents and rental listings -- but is quickly catching up.
Back to Zillow it's hard to recommend a stock that has climbed so much in the last three months simply because the good news is probably already baked in. Even with that big jump in the shares, Zillow has underperformed traditional homebuilder Toll Brothers (TOL). In fact, in the one-year period ending Wednesday, Toll Brothers has gained 60% vs. Zillow's 15% rise. It seems it's better to get your hands dirty and buy the homebuilders, rather than those that simply post for-sale listings
