Zillow, the dominant player in the online real estate search market, offered weak guidance in a Tuesday morning conference call, and the shares dropped as much as 12% on the news. The stock has recovered somewhat as of 11:45 AM ET, and is currently trading down around 4%.
Zillow CEO Spencer Rascoff said in the call to investors that the firm is projecting EBITDA in the range of $80 million to $85 million for 2011, whereas the consensus analyst estimate was $146.8 million, based on data from FactSet.
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Hangover from recent Trulia acquisition
Of note, Zillow completed its acquisition of major rival Trulia on February 18th of this year.
Rascoff also said during the call that 2015 was “a little messy,” and admitted that Trulia is “softer than we’d like”. He attributed most of the weakness to the lengthy FTC review process.
He also noted that the firm has “successfully rightsized our company and reduced our expense base” by terminating more than 350 employees since the Trulia deal was finalized.
Rascoff also commented on the Tuesday morning conference call that he would give his company “a very good report card for the first eight weeks” after closing the deal with Trulia. Furthermore, the firm is now is looking forward to $100 million in synergies by the end of 2016.
Statement from Zillow CEO Rascoff
“The work we are doing this year lays the foundation for an incredibly bright 2016 and 2017. However, 2015 is a transition year and we’re trending a couple quarters behind where we’d like to be, due to the protracted [Federal Trade Commission] approval process which only ended two months ago,” Rascoff commented in reference to his firm’s recent merger with Trulia.
He went on to claim that that way-below consensus guidance was a direct consequence of “some decisions to establish our foundation for growth that will impact our results in the near term.” Rascoff highlighted a decrease in advertising placements for the Trulia platform and other strategic moves.