Can Zillow Inc (Z) Keep It Up?

Skeptics will argue that as interest rates rise, mortgage applications cool, and price increases subside, Zillow Inc (NASDAQ:Z) will lose its mojo. Unfortunately, history doesn’t agree with that bearish thesis. Zillow actually thrived during the real estate crisis. Real estate brokers need to do more to stand out when times are tight, and that includes keeping their premium subscriptions to Zillow going in order to reach out to potential buyers and sellers.

The valuations certainly aren’t for the squeamish here.

Zillow Inc (NASDAQ:Z)’s fetching 179 times next year’s earnings. Yes, Zillow’s investing a lot of money on growth, but even Zillow’s top-line multiple — trading at 13 times next year’s projected revenue — is steep.

Naysayers are still getting cold feet. The number of Zillow Inc (NASDAQ:Z) shares sold short has gone from 9.3 million when the year began to just a little more than 5 million now. This may be an encouraging sign, but it also makes it less likely for short squeezes to push the shares even higher in the near term. It wouldn’t be a surprise to see Zillow give back some of this year’s monstrous gains given the current valuation and bubbly real estate market fundamentals, but we also can’t forget that Zillow has managed to thrive on both ends of the realty bubble.

No matter how in demand a home — or a real estate portal — may be, it always pays to take the time to perform an appraisal.

The article Can Zillow Keep It Up? originally appeared on Fool.com.

Longtime Fool contributor Rick Munarriz has no position in any stocks mentioned. The Motley Fool recommends Zillow. The Motley Fool owns shares of Zillow. 

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