Real Opportunity in Zillow?

Featuring Louis Llanes

Louis Llanes, founder of Wealthnet Investments, takes a close look at the charts of Zillow. He explains why he sees opportunity, and provides an idea for how to play the stock now. Filmed on May 29, 2018.

Published on
31 May, 2018
Topic
Trading, US Economy, Housing Market
Duration
12 minutes
Asset class
Equities
Rating
15

Comments

  • AS

    A S.

    4 6 2018 19:00

    0       0

    https://www.screencast.com/t/A8TqGmftNEJF

  • JM

    John M.

    1 6 2018 22:48

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    From your perspective, how does Zillow's new product and revenue opportunity differ from the 'Make Me Move' feature that's been a part of their platform for many (5+) years? Are they simply directing more marketing dollars to increase homeowner engagement in that tool? Thanks for the thoughtful analysis!

    • LL

      Louis L.

      2 6 2018 10:41

      3       0

      Thanks for question. ZG plans to buy homes directly from homeowners and pre market it. Sellers will have a quick sale without hassle. The make me move is a longer process that uses traditional sales process. ZG makes more money in the new proposed model they are testing.

  • NI

    Nate I.

    1 6 2018 05:57

    2       0

    1. Others like Opendoor and private equity groups are entering the same market opportunity. ZG will be competing with these new players for properties. In that regard, it's far from given for ZG to successfully execute on this new strategy - even at the 50% level.

    2. Hoisington Investment Management is probably correct in forecasting interest rates will remain low for some time, but if rates go up, that is also a potential pitfall for the ZG flipping plan, again even at the 50% level.

    3. As a recent home buyer (just closed a couple weeks ago), I have some VERY negative things to say about ZG's web user interface. I could write a short novel on this topic (having looked at roughly 5000 houses on-line before buying mine), but in a nutshell the ZG filter criteria are woefully inadequate and the rendered information is not concise (it takes forever to review a property listing because the fonts are elephantine and ZG forces the user to keep hitting "more" in various parts of the listing to locate key information - a VERY painful waste of time). In the end, I still engaged with a Realtor old school style (much to my chagrin and it wasn't someone I found using Zillow), had the Realtor enter my search criteria into the MLS engine (which is at least 20x more comprehensive than ZG), and obtained daily emails with listings of new properties that matched my criteria.

    4. The ZG database is often stale. It will show homes for sale that are off the market. This translated into numerous time wasting calls to my Realtor before I mostly gave-up on ZG.

    Ultimately, I ended up mostly using ZG for their Zestimate feature on something that looked interesting, but I often found those estimates were wildly wrong (I hope that's not the "proprietary data" ZG plans to use in making offers or they will really be in deep siht) so even that feature was of dubious value.

    My input to Louis would be to use ZG for a serious house hunt and then see if he remains as bullish. The stock might indeed rise on the hope from the story they're telling, but I'm very skeptical of ZG management being able to execute. I can virtually guarantee ZG management has never used their own web site in a serious way for a home search.

    I agree with Linda A. It was wonderful to eliminate the introduction and cut to the chase!

    • LL

      Louis L.

      1 6 2018 12:27

      1       1

      Thanks for comments. The data isn’t perfect. The Zestimste figures work extremely well for median priced homes in particular markets. They know this and that’s where they will focus. I have used Zillow for search and sold and bought a home using data form ZG. The Zestimates were way off because the homes were in higher price range. But that’s not the point. They aren’t fishing this pond. Your point about the private equity guys. They don’t have the search data, they don’t have the eyeballs, they don’t have the brand recognition. They will have to spend huge money to get anywhere and will have low ROI for years. I’m looking to make money now. ZG has better prospects now. Lastly it’s a speculative play because they haven’t proven their ability. Manage risk. Thanks for listening and I appreciate your comments.

    • LL

      Louis L.

      1 6 2018 12:35

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      I mentioned the risk of an economic downturn during the video shoot as well as a myriad of other risks. For some reason RV edited it out.

    • PP

      Peter P.

      4 6 2018 11:20

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      Nice comments. Personally I never think of Zillow as anything but a “pre-tool” for doing basic searches before getting into the nitty gritty of an actual search with an agent.

  • LA

    Linda A.

    1 6 2018 02:49

    3       0

    I love this format- no introduction, cuts to the chase, superb analysis.

  • TR

    Travis R.

    31 5 2018 21:37

    5       0

    Zillow should integrate blockchain into property records to eliminate title insurance. Also integrating AI into mortgage underwriting would be a wise move. Current real estate transaction costs of close to 10% are usurious. The time has come to eliminate the middleman ie. RE agents, title insurers, mortgage brokers, etc.

    • LL

      Louis L.

      31 5 2018 22:31

      2       0

      I agree and Zillow has an opportunity to redefine the industry and capture more of the spread.

    • LL

      Louis L.

      1 6 2018 00:23

      2       0

      No doubt about it. Transaction costs will come down and the current industry establishment can’t do much about it but adapt.

  • GO

    Greg O.

    31 5 2018 17:07

    5       0

    While I don't trade stocks and I don't listen to someone's trade ideas (I always try to trade what the Mr Market is telling me to do) I have to say that I enjoyed watching this guy. He presented his idea nicely, touched on many different aspects, overall a good job.

  • LB

    Luke B.

    31 5 2018 13:08

    8       0

    Exciting one to hold LT this one. Zillow have control of the audience, they won't lose it from here, yet ZG have barely touched the sides of true monetization of all touchpoints of a property transaction, including the immense value to the property owner - the SELLER. Compare other market leaders overseas being LON:RMV and ASX:REA who are much more progressed in monetizing. ZG control the audience of a $33 TRILLION asset class. There is huge amounts of work ahead, product innovation, transaction disruption and game changers to introduce. With $2T? of real estate transacted each and every year, long run blue sky revenue $10B PA can't be ruled out. This is not going to be a $10B company for much longer. Disc. hold (long term) position in Z.

    • LL

      Louis L.

      31 5 2018 17:01

      3       0

      Good points Luke B!