Zillow ($Z) Weakness Coming?

zillow-logo

I have been a bull on Zillow ($Z) since the summer of 2013 (read here) and watched the stock soar from $90 to $160 in less than 12 months. Being bullish on a growth/momentum  stock like Zillow ($Z) requires one to dig a little deeper to find value, as those using  typical metrics usually find themselves on the sidelines and miss out on a big run .

Some of the metrics I used to back my bull case on Zillow , was the hot housing market, along with the continued user growth of Zillow's mobile app and website. I considered Zillow a disruptor in the Real Estate sector and as long as they continued to show huge growth, the companies fundamentals would catch up with it's lofty stock price. Unfortunately I feel like the trend has started to change, and Zillow's ($Z) growth has slowed enough to warrant a lower stock price.

Visits to Zillow's website seems to have plateaued since July, with Unique User Visits dropping from 84 million  to 72 million as of November:

Zillow MUU

Other sources like Alexa and Google Trends point to the same conclusion - less people are using the site. You can see the Alexa data I pulled in the spring, and compare it with today and see the drastic difference in the traffic:

ZILLOW TRENDS april

ZILLOW TRENDS 12-23

Last but not least, was the November Existing  Home Sales number that came in at a 6 month low on Monday. Is it the start of a trend, or just a blip? It will be a few months before we have an answer, but I think it puts some pressure on Zillow ($Z).

The Housing market is typically slower in the winter, so some of the weakness can be explained, but a momentum stock like Zillow ($Z) is usually not given the same free pass that a mature company might be given.

I added some puts today and may look to continue to add puts for a move under $100 on Zillow($Z) in the coming weeks.

Zillow 12-23-14

Happy Trading!

- JB

JimmyBob (Scott)has been trading equities for over 15 years, a majority of which were OTC micro-cap stocks. He started trading high risk stock options over the past 7 years, and has proven winning trades in excess of 15,000%.

As one of the Co-Founders of optionmillionaires.com, Scott enjoys sharing his knowledge with other investors through timely blog posts, daily watch lists in the forum, weekly webinars, and helpful advice within the chatroom.

More Posts by JB: View All | Private Twitter Feed: Access Now! (For Diamond Members)

Leave a Reply