What Happened?

Shares of online real estate marketplace Zillow (NASDAQ:ZG) jumped 25.2% in the afternoon session after the company reported strong third-quarter earnings that exceeded analysts' revenue, EBITDA, and EPS expectations. However, Q4 guidance was mixed, with revenue in line while EBITDA came in below. Regardless, the results were encouraging amid a challenging operating environment as elevated rates have impacted the purchasing power of home buyers, leading to lower transaction volumes. 

However, for Zillow, the situation is more encouraging as technical updates to user experience and the introduction of new features drove user engagement on its platform. As a plus, the company is also diversifying income sources from its traditional real estate listings by offering services such as mortgage lending and rental platforms. Zooming out, we think this was a solid quarter, and the market seems to be focusing on the quarterly beats.

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What The Market Is Telling Us

Zillow’s shares are quite volatile and have had 19 moves greater than 5% over the last year. But moves this big are rare even for Zillow and indicate this news significantly impacted the market’s perception of the business. 

The biggest move we wrote about over the last year was 3 months ago when the stock gained 19.1% on the news that the company reported strong second quarter earnings results. Zillow blew past analysts' EPS expectations, and its revenue also outperformed Wall Street's estimates. There was broad-based strength across the company's segments, with rentals (an area of focus for investors) making encouraging strides. Zooming out, we think this was a good quarter, especially with skittishness around the health of the housing market due to higher interest rates than a few years ago.

Zillow is up 24.3% since the beginning of the year, and at $69.83 per share, has set a new 52-week high. Investors who bought $1,000 worth of Zillow’s shares 5 years ago would now be looking at an investment worth $2,071.

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