Zillow Costs Less Than $28 a Share. Here's Why I'd Still Not Buy One.
Legal issues and macroeconomic headwinds pose significant challenges for the real estate company.
Overview
In the past 12 months, Zillow's (NASDAQ: Z) share price has collapsed by more than 60% as of this writing. The reasons for the crash are multifaceted. The path to recovery looks increasingly difficult. The stock is cheap, but for a reason, and I don't see a turnaround anytime soon.
The second-quarter earnings weren't bad at all. Revenue grew 18% year over year, and the company's mortgage division expanded an impressive 75% to $84 million. The problem is that Zillow still posted a GAAP loss of $4 million in the quarter.
Details
Plus, even with the decline in share price, the stock is still trading at 124 times trailing earnings. The potential recovery isn't getting any easier, as Zillow contends with macroeconomic factors, including a slowing housing market and rising mortgage rates. It's also facing challenges in the form of legal matters and competition. Zillow was cut off from more than 30,000 listings in Chicago recently. The company's competitive edge could crumble if antitrust lawsuits don't go Zillow's way.
Source
Originally published at www.fool.com.