You might have missed it but web stock Trulia (TRLA) turned public last month at a price of $17.00 and without any surprise, I’m adding it to the stocks that I follow. One of the things I love about Trulia is that its main competitor, Zillow ($Z) is also a stock that I follow and trade. It will hopefully provide me with good trading opportunities in the same way as Monster Worldwide (MWW) vs Dice Holdings (DHX) or some of the travel web companies (KYAK, PCLN, EXPE, TRIP, TZOO, etc). Both companies are very similar in the services they offer, how they make money, etc. Zillow is the bigger of the two and clearly the leader but I can see why some think that TRLA might be a good bet.
Here is a look at their main websites:
You can also see web traffic data for both:
Zillow Web Traffic
Trulia Web Traffic
And here are the main numbers:
Ticker Name Price EPS PE Ratio PE Next Year Return YTD Sales Growth Analyst rating Book Value Mkt Cap
Z Zillow Inc 38.55 0.05 231.06 61.47 73.98 116.8 4.2 3.86 $1,298,017,578.13
TRLA Trulia Inc 21.9112 -0.3 N/A N/A N/A 94.68 0 -0.15 $553,645,935.06
So Zillow is currently worth about 2.44 times as much as Trulia. Is there already an opportunity? I thought it would be interesting to look even though I doubt I’ll be trading Trulia right away after being burned on recently turned public TripAdvisor (TRIP) earlier this year. Zillow made what is almost certainly a smart move as it did a secondary offering of its stock a week before Trulia’ IPO in order to get cash at decent pricing before its competitor entered the market.
Interesting Stat: Insider Holdings
I don’t usually pay much attention to this stat mainly because there are so many ways for insiders to move around it. I also assume that most of Trulia’s insiders are still locked in given the fact that the company just turned public. So not a big deal but still worth noting.
Earnings Per Share
Clearly, the revenues difference is not as big we might imagine but in terms of earnings, Zillow is profitable while Trulia remains far from that point up to now.
Questions Surrounding Zillow (Z)?
A few days ago, Andrew Left of Citron Research wrote a very negative report about Zillow that you can read here, it is worth the read. That and lower overall market sent the stock down 7%. Add to that a report that the company is being questioned by the SEC regarding its filings and you can see that there are at least some clouds on the horizon. A very valid point that I saw raised by Ang Nguyen was the fact that Zillow’s growth was limited since it already has so many houses and agents already using its services. How much more can it do? I often see that argument raised in the case of Facebook which I completely disagree with. I’m unable to go as far about Zillow and Trulia because I don’t know enough but I certainly do agree that possibilities are more limited. That being said, real estate is a HUGE industry so there are clearly many other things they could do in the future.
Do Valuations Make Sense?
When I look at Zillow current earnings and estimates for this year ($0.31 per share) or even next year ($0.64), the stock does look very expensive, especially in the light of the Citron Research paper. It’s also the case for Trulia which has a more question road to go to reach profitability.So I would not consider buying either of these as long term speculative buys. Trading them as part of my long & short tech stock picks though would certainly make a lot more sense.
What are your thoughts on Zillow and Trulia?
Disclaimer: No position on either name