8. Zillow Group, Inc. (NASDAQ:Z)
Ark Investment’s Q4 2020 Investment Stake: $841 million
Number of Q1 2024 Hedge Fund Investors: 77
Share Price Performance Since 2020 End: -64.3%
Zillow Group, Inc. (NASDAQ:Z) is a software company that operates a diversified platform for real estate transactions in the US. Ark Invest first took a stake worth $7.9 million in the firm in Q2 2019. This grew to $1.2 billion in Q2 2021, and sits at $9.6 million as of Q1 2024. October and November 2021 were particularly rough for Zillow Group, Inc. (NASDAQ:Z)’s shares, after its announcement that it would exit the home buying market. Back then, Zillow Group, Inc. (NASDAQ:Z) bought and resold homes, and provided the associated mortgage and escrow services. This segment generated $1.4 billion in revenue in 2020, but its inability to price the home market led to $500 million in write offs in a tumultuous era for the market during the coronavirus crisis. Since 2020 end, Zillow Group, Inc. (NASDAQ:Z) has failed to grow its revenue. It sat at $2.1 billion in 2021 end and dropped to $1.9 billion in 2023.
Due to its business model, Zillow Group, Inc. (NASDAQ:Z) has been unable to catch a break especially since high interest rates depress the housing and real estate market. This has led management to position the firm as a technology provider. During the Q1 2024 earnings call, Zillow Group, Inc. (NASDAQ:Z)’s management shared:
In an ongoing tough rate environment, we also continued to make strong progress in mortgages with Q1 revenue of $31 million, up 19% year-over-year and purchase mortgage origination volume growing more than 130% year-over-year. So in a hostile housing market and a noisy industry environment, why is Zillow outperforming? The simple answer is that Zillow is wholly-focused on solving real consumer problems with software in a giant industry that has historically had very little R&D investment. Digitally re-platforming and integrating a huge, disparate local industry where transactions are relatively infrequent is an audacious undertaking.
No other company is really even attempting it. We are advantaged primarily because we are a product and technology company first, and are able to attract and retain the especially talented people, who know how to build market and support great software products. This enables us to focus completely on delighting our consumers and their valued partners in pursuit of the dream of using technology to make moving simple and joyful. Our product prowess over the years has put Zillow in the enviable position of having a large engaged audience, who come to us organically, an audience who love, trust and rely on our brand. This product-led organic marketing growth story is rare, but it is common for the great ones. Those are the products and brands we admire the most.
