Zillow Group reported fourth quarter 2020 earnings of $789 million on Wednesday, easily beating Wall Street’s estimates.
Despite what Zillow officials referred to as a “rough” first half of the year due to COVID-19’s impact on the economy, the $789 million represents a consolidated revenue growth of 22% from 2019. It also boasted $170 million in earnings before interest, taxes, depreciation and amortization (EBITDA) in the fourth quarter, above Wall Street’s estimate of $125 million. For the year 2020, Zillow posted $343 million in EBIDTA.
Online traffic reached record highs, with 201 million average monthly unique users reported in the fourth quarter of 2020 – the most unique users Zillow has ever had in the fourth quarter of a year, according to officials – and 2.2 billion visits.
For 2020, Zillow reported 9.6 billion visits, up 19% from the previous year.
Zillow also announced it has agreed to pay $500 million to acquire ShowingTime, which makes software for prospective buyers to arrange showings with agents.
The Seattle-based company, which has mostly pivoted from selling advertising to real estate agents into iBuying, acquired 1,789 homes in the fourth quarter. That was just two more homes than they had acquired a year prior, just before COVID-19-related shutdowns froze the business in place.
In a letter to shareholders, Zillow CEO and co-founder Rich Barton and CFO Allen Parker said the company also expects a strong first quarter of 2021.
“Looking ahead, our Zillow economists have made bold predictions for an even stronger housing market in 2021 than what we experienced in 2020,” the letter states. “They are projecting the number of home sales to grow 21% for the year, as well as double-digit home price appreciation.”
Year over year, Zillow’s IMT segment revenue grew 33% to $424 million, home segment revenue reported $304 million (a fourth quarter 2019-pace), and mortgage segment revenue grew 190% to $61 million. Cash and investments grew to $3.9 billion at the end of the fourth quarter, up from $3.8 billion at the end of the third quarter.
According to Zillow’s own Home Value Index, the company expects seasonally adjusted home values to increase by 3.7% from the end of December 2020 to March 2021, and by 10.5% through December 2021. It also predicts home value appreciation to peak in June 2021 at 13.5%.
The seasonally adjusted annualized rate of existing home sales in November 2020 was 6.69 million – up 25.8% from November 2019, per Jeff Tucker, Zillow senior economist. Officials expect this rate to remain high – above 6.65 million – through 2021.
“Our bullish outlook for sales and home values is driven by the current strength of the home-buying market and our expectation that low mortgage rates, demographic tailwinds and an improving economy will continue to prop up market competition,” Tucker said.
Expect more technological advances for the company in the new year, the letter to shareholders said.
“We are connecting services together for our customers and using our low cost of customer acquisition across multiple products to compete against an industry of largely single-point solution providers with high customer-acquisition costs,” it read.