Zillow, the digital real estate company, said on Tuesday that it’s exiting Offers, its business that buys and flips homes, and eliminating 25% of its workforce.
The announcement was attached to Zillow’s third-quarter earnings report. The company’s revenue and earnings missed analysts’ estimates.
“We’ve determined the unpredictability in forecasting home prices far exceeds what we anticipated,” Zillow CEO Rich Barton said in the release. “Continuing to scale Zillow Offers would result in too much earnings and balance-sheet volatility.”
The stock dropped about 7.5% in extended trading following a 10% plunge during regular market hours. The shares are now down about 10% for the year as of Tuesday’s close.
Here are the key numbers from earnings:
Earnings per share: loss of 95 cents adjusted vs. profit of 16 cents per share expected in a Refinitiv survey of analysts Revenue: $1.74 billion vs. $2.01 billion expected by Refinitiv Revenue in Zillow’s Offers business, which competes with Opendoor, climbed to $1.17 billion in the quarter. That’s way up from $186 million a year earlier, which was in the middle of the pandemic and in a dry period for transactions. However, the homes segment, which is mostly Offers, lost $422 million in the quarter, producing an overall net loss at the company.
Seems like the strategy of buying 80 cents for the dollar just to capture market shares has finally backfired.