Zillow Group (NASD: ZG)
Shares in Zillow Group, the owner of some of the United States’ most dominant online real estate platforms, look set to Soar…beginning now.
If there is a realestate.com.au in the US, then it’s Zillow Group. The real estate company is currently a dominant player in the US housing market owing to its futuristic investment approach, disruptive technology, and most importantly, the homebuyer advantages it offers.
At UGC, our research leads us to believe that Zillow Group possesses the potential to transform the entire US real estate industry, on the back of what we expect to be a huge surge in US millennial home buying over the course of the next decade and beyond.
US Millennials (popularly known as Generation Y) started their home buying much slower than previous generations because of high rates of unemployment and the US housing bust. However, research released in 2016 from The Pew Research Center, reveals an interesting new insight.
For the first time in one hundred and thirty years, young Americans showed more inclination than any other generation before it to continue living with their parents. Much of this phenomenon, however, was forced on them as a result of the economic conditions that prevailed, right at the time they were leaving school and university and trying to get their first jobs. But according to The Pew Research Center, millennials are now bringing about a change in the US housing market by embracing the idea of living separately from their parents.
Right now, on the back of a strong economy and very low unemployment, this generation of Americans have now begun moving out of basement rooms and buying their own homes and properties. But this time around they are doing it in a very different manner to their parents. The way millennials make buying decisions is through the use of technology.
Millennials have just begun to step into the nesting phase of their lives, a stage when they are settling down, getting married, and raising families. This is the reason why people in the age bracket of 18 and 34 comprise the largest demography of homebuyers in the US real estate market. The National Association of Realtors also backs this fact.
The major factor that’s transforming the US housing market is the Internet, which has opened the doors to data that used to be the sole domain of real estate brokers. One now can easily look up housing prices, statistics on neighborhoods, school district ratings, and much more, where only a decade ago this information was not publicly available.
The Internet of Things (IoT) and disruptive technology are driving the US housing market today. Large data companies have managed to gather all sorts of information about the kind of houses people prefer buying. The data from people’s online searches answers who buys what, why, when, and where.
Thanks to big data, homebuyers can do away with middlemen and brokers, thereby sparing them the expenditure and hassle. They can now look for housing on their own accord and leverage data to solidify their choice. The only thing people need is a platform where they can find houses, and Zillow Group is the gorilla in the room.
At UGC, our research indicates that Zillow is revolutionizing the US housing market in a similar way Amazon did to the retail sector. The company has become the world’s largest real estate marketplace, having a database of over 110 million homes in the United States. The platform enjoys a user base of 187 million on both its web and mobile app versions.
Besides its own domain name, Zillow Group has Trulia, HotPads, StreetEasy, Naked Apartments, Realestate.com, and Out East under its umbrella of real estate websites. This vast network targets millennials and has changed the real estate game. Data that was once unobtainable is now available at the click of a button. Thanks to Zillow Group’s platforms, finding a new house has become so much simpler. Just fill out an online form, give your search parameters, and get access to a plethora of houses, apartments, and condos from all across the US.
For the very first time in its history, Zillow Group is approaching profitability. My experience tells me that buying organizations like ZG when they are on the cusp of profitability if often a very rewarding strategy. Gains can be made in a very short space of time. The company is seeing revenues rise rapidly, jumping 27 percent in 2017. But if that’s not impressive enough, the market expects revenues to increase at an even faster pace in the future, with expectations currently sitting around 39 percent growth in 2018 and 43.6 percent in 2019.
With the share price having recently broken out to the upside of a 22 month basing pattern, it looks like this stock won’t be hanging around current levels for long.
Disclosure: I and UGC clients own shares in Zillow Group.