After recent IPO’s by LinkedIn (LNKD), Pandora (P), Yandex (YNDX) and others, the recent IPO by Zillow (Z) went nearly unnoticed. I had been waiting for the stock to go public and while I’m disappointed that this is yet another low float IPO, I am still adding the stock to the stocks that I follow and like the company and what it has been doing. The question, as always, will be if the valuation is right to trade on.
What Is Zillow?
Zillow is a fairly simple company to understand, it operates a website that tracks prices, sales and other information regarding real estate. It is highly valuable information for anyone involved in real estate markets in the US, especially for real estate agents.
Where Do Revenues Come From?
They are twofold for the moment as Zillow sells subscriptions to agents that get premium services and locations. As is the case for most big internet listed stocks, the majority of its revenues is derived from advertising however. In that sense, I consider Zillow to be a fairly simple business to understand and could see myself trading it in the near future. To give you an idea, Zillow generated $11.3 million of revenues in the first quarter of this year, much lower than recent internet IPO’s that we’ve discussed. It has also yet to turn profitable losing a bit less than $1 million in the first quarter.
On a comparative basis, Zillow has a more reasonable value to revenues ratio. It is trading at a similar ratio as Pandora (P) (13.3) and much cheaper than LinkedIn (LNKD) (26). I do think that Zillow has a lot less upside potential in the short term than a company like LinkedIn (LNKD) but it could still be an attractive target.
No Trading on Zillow For Now
Of course, you should not expect any trades on Zillow from me in the near future because the stock is still highly volatile making trading like I do become more about luck than anything else. I know some would argue that all trading is based on luck but I would certainly like to think there’s a bit more to it!