Zillow, Inc. (Z) will host a conference call to discuss its third quarter 2013 financial results on Tuesday, November 5, 2013 at 2 p.m. Pacific Time (5 p.m. Eastern Time), following the release of the company's quarterly financial results. Zillow® CEO Spencer Rascoff and CFO Chad Cohen will host the webcast.
Wall Street anticipates that the internet service provider will lose $0.08 per share for the quarter. iStock expects Z to top Wall Street's consensus number. The iEstimate is a loss of $0.05.
Zillow engages in the operation of a real estate and home-related information marketplace on mobile and the Web in the United States. The company owns and operates Zillow.com; Zillow Mobile, a suite of home-related mobile applications; Zillow Mortgage marketplace, where borrowers connect with lenders to find loans and get mortgage rates; Zillow Digs, a home improvement marketplace for consumers to find visual inspiration and local cost estimates; and Zillow Rentals, a marketplace and suite of tools for rental professionals, Postlets, Solutions, Buyfolio, Mortech, and HotPads.
In its limited public life, Zillow has smoked past Wall Street's consensus seven of the last eight quarterly checkups. The average bullish surprise was 336.63% more than analysts' expectations. WOW. Profits fell short once by 10%, which was just a penny.
As you might expect, Zillow's earnings-driven price-performance mostly lines up with the direction of the surprise. Z's price gained ground in the three-day surrounding the new six of seven better than expected results. Meanwhile, one bullish surprise and the lone miss were greeted with boos and a backpedalling stock price.
The average gain for the half-dozen green reactions was 11.15% while the pair of red reactions averaged 20.65%. Based on this history, Zillow is likely to swing dramatically following Tuesday afternoon's announcement.
Picking the right side of the tape is the question. Let's see if we can find some clues using website traffic and! search trends, along with last quarter's 10-Q.
First up, the number of visitors to Zillow.com increased in Q3 versus Q2, according to Alexa.com and Quantcast.com. Both sites are unofficial numbers but are in agreement. Using Quantcast's traffic estimates, iStock calculates a 13.56% increase in traffic to Zillow.com during the third-quarter relative to the second quarter. Meanwhile, Alexa.com says page views were up 5.30% during the last three months.
Our traffic findings are confirmed by Google Trends. Quarter-over-quarter (QoQ) search volume intensity for the keyword "Zillow" increased by 9.56%. More visitors and more pageviews usually mean more revenue for websites. In Q2, Zillow turned a penny profit on versus expectations of a loss of 11 cents.
With the pieces in place to generate more revenue, it comes down to management controlling expense. In the second quarter's 10-Q, there were a number of references to higher expenses to help the business grow.
The key for iStock is a company's ability to keep costs and revenue increases/decreases in line. In other words, if sales are growing by 10%, we want to see costs increasing by no more than 10%. Of course, our preference would be for costs to climb at a slower rate or actually fall, but a one-for-one ratio is cool with us.
But, this in not the relationship iStock found in Q2's 10-Q. Total costs and expenses jumped 116% while revenue increased 69%. On the surface, the relationship looks bad; however, 100% of the difference comes from the sales and marketing line-item, which we see as more of an investment than a cost. If it is money well spent, it should translate into future business and a positive return on investment. Perhaps, evidence of it being money well-spent will show up in forward guidance.
Otherwise, all other costs increased at a similar pace as revenue growth.
Overall: The iEstimate, Zillow, Inc.'s (Z) EPS surprise history, Google and web traffic trends suggest Z will deliver another stron! g announc! ement after the market closes on Tuesday. Hopefully, for shareholders, the sales and marketing investment will begin to pay off with robust guidance.
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