Zillow Inc (NASDAQ:Z) shares skyrocketed 18.7% last week on news of Trulia Inc (NYSE:TRLA)’s record quarter. The online real estate company announces its own earnings Tuesday, and investors are waiting to find out whether this soaring stock is about to stumble.

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Expectations for Zillow

Profits are harder to boost than clicks, warns Spencer Jakab at The Wall Street Journal  amid high expectations for Zillow Inc (NASDAQ:Z)’s second-quarter earnings report. Shares in the real estate portal and lead generation site for real estate agents hit an all-time high of $94 Monday before closing at around $90, giving the company a market capitalization of more than $3 billion.

Zillow Inc (NASDAQ:Z) is scheduled to report 2Q results on Tuesday, August 6th.


Housing market rebound benefits real estate listing sites

Both companies operate websites and mobile apps that enable users to research home listings and neighborhoods. They make money from helping real estate agents market their listings.The housing market rebound benefits real estate listing sites, because it motivates more people to seek out homes for sale, driving more real estate agent marketing dollars.

Jim Cramer of CNBC explains the excitement that is coming back to the “dot-com” industry which relies primarily on website traffic to generate most of its revenue. So as the likes of Facebook Inc (NASDAQ:FB), LinkedIn Corp (NYSE:LNKD) and Trulia Inc (NYSE:TRLA) post monster quarters, investors are looking to the next big thing.

Aaron Kessler, an analyst at Raymond James, expects upside to 2Q revenues based on strong 2Q traffic data and positive read-through from Trulia 2Q results. He estimate 2Q revenues of $44.7 million slightly above consensus of $44.4 million and guidance of $43.5-44.5 million and GAAP EPS of $(0.39) vs. consensus of $(0.40). Kessler noted that Zillow has historically issued conservative guidance with reported revenue/EBITDA exceeding the high end of guidance by an average of $1.8 million/ $2.0 million over the past seven quarters. He remains positive on Zillow Inc (NASDAQ:Z)’s fundamentals and maintains a Market Perform rating based on valuation (13x 2014E revenue/82x EV/EBITDA).

Zillow Inc (NASDAQ:Z) reports second-quarter results after the closing bell Tuesday. In the first quarter, the firm generated $39 million in revenue and had an adjusted EBITDA margin of 13%. Now, obviously, margins improve as revenues grow — but Zillow’s best-ever margin was 24%, in the third quarter of 2012.