Shares in Zillow jumped more than 8% last week after the company reported third quarter earnings that blew past analysts estimates and offered better than expected fourth quarter guidance.
More Americans are moving home due to record low mortgage rates and the pandemic-related trend towards remote work, and that has spurred an increase in sales of existing homes. And Zillow, which provides inventory across the U.S. along with technology that helps buyers shop for homes and take virtual tours, is benefiting from that increased activity.
The company reported earnings before certain costs such as stock compensation of 37 cents per share on revenue of $657 million. Wall Street had forecast earnings of just 11 cents per share on revenye of $572 million.
For the next quarter, Zillow has forecast revenue of $709 million to $748 million, well ahead of Wall Street’s forecast of $683 million in sales.
“We believe these tailwinds are durable, supported by low interest rates and demographic shifts,” Zillow CEO Rich Barton said in a statement.
Zillow’s stock had already more than doubled in value this year prior to its Q3 earnings report. That’s despite Zillow having to put a hold on one of its major businesses, Zillow Offers, which buys homes from people then sells them on for a profit, due to the COVID-19 pandemic. But Zillow Offers later resumed its buying activity once it became clear that the pandemic wasn’t going to lead to a decline in property transactions.
Even so, Zillow’s main revenue growth is being driven by its activity in facilitating real estate transactions, and its new mortgage business.
Mortgage revenue increased 114% in the third quarter to $54 million, helped by increased refinancing activity that’s driven by lower mortgage rates, Zillow said. Meanwhile, revenue from its main internet-related business rose 24% to $415 million as demand for home purchases and rentals increased during the quarter.