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Earnings Results: On anniversary of home-flipping flop, Zillow is done selling houses

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Zillow Group Inc. is done selling houses a year after ditching its iBuying business, and executives reported better-than-expected earnings and revenue while wrapping up the effort in the third quarter, though their forecast undershot Wall Street’s expectations.

Zillow
ZG,
-4.94%

Z,
-4.78%

reported a third-quarter loss of $53 million, or 21 cents a share, on net revenue of $483 million, down from $1.74 billion a year ago. After adjusting for stock compensation, losses from discontinued operations and other effects, Zillow reported earnings of 38 cents a share, improving from an adjusted loss of 95 cents a share a year ago.

Analysts on average expected adjusted earnings of 14 cents a share on sales of $458 million. Zillow stock increased more than 4% in after-hours trading following the release of the results, after closing with a 4.9% decline at $29.43.

Zillow’s sales declined from last year because of what happened on this date in 2021: The end of the company’s experiment with participating in the industry it services. On Nov. 2, 2021, Zillow announced that it was ditching its home-flipping business and selling a large portfolio of homes that it had purchased for too much amid changes in the housing market, while laying off a quarter of staff.

Those changes have continued in the past year, as Zillow has unloaded all of the homes. Executives said Wednesday that the sales were complete as of the end of the third quarter, on Sept. 30, and the division had been completely shut down.

The housing market continues to be unstable, however, making the path forward unclear. Zillow executives Wednesday guided for fourth-quarter revenue of $396 million to $425 million, as well as adjusted Ebitda of $48 million to $63 million. Analysts on average were expecting adjusted Ebitda of $89 million on sales of $434 million for the final three months of the year, according to FactSet.

Management has continued to make changes in reaction to the changing environment, including laying off even more workers last week. Executives have said their ultimate goal is to meld the assets of its two remaining segments — Internet, Media and Technology, or IMT, as well as the mortgages business — into a mobile “super app” that can help buyers and sellers navigate the entire home-buying and -selling process.

“While the housing market is challenged right now, if long-term average turnover rates persist, we would expect 60 million homes to trade hands over the next 10 years, and that’s the basis of the opportunity we are focused on while keeping a careful eye on the current environment,” executives told investors in a letter Wednesday.

Zillow shares have declined 52.7% so far this year, as the S&P 500 index
SPX,
-2.50%

has dropped 19.1%.

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