Zillow (ZG) Stock Plunges 13%: What's Behind the Drop?

Zillow Group, Inc. (ZG) stock tumbled 13.1% through 10:20 a.m. ET on Wednesday, February 13, 2025, despite beating Wall Street sales forecasts in its earnings release the previous day. The decline can be attributed to several factors that align with the company's long-term fundamentals and recent challenges.



1. Earnings and Revenue Growth: While Zillow reported strong revenue growth of 17% year over year to $554 million in the fourth quarter of 2024, the earnings missed the Zacks Consensus Estimate by 2 cents. This discrepancy between revenue growth and earnings growth may have contributed to investor concerns about the company's profitability (Zillow Group, Inc. ZG, 2025).
2. Net Loss Margin: Zillow's net loss margin was 9% in the fourth quarter of 2024, compared with 15% in the prior-year quarter. Although this represents a significant improvement, the net loss of $52 million may still be concerning to investors, especially given the company's history of losses (Zillow Group, Inc. ZG, 2025).
3. Valuation: Zillow's stock is valued at approximately $17.6 billion, with a forward price-to-earnings ratio of around 62 times. This high valuation may be a factor in the stock's decline, as investors may be concerned about the company's ability to maintain or grow earnings at a pace that justifies such a high valuation (S&P Global Market Intelligence, 2025).
4. iBuying Exit: In 2021, Zillow announced the shutdown of its iBuying business, Zillow Offers, due to inaccurate home price forecasts and significant losses. Although the company has since exited the iBuying market, the lingering effects of this decision may still be weighing on investor sentiment (Zillow, 2021).
5. Regulatory Uncertainty: The National Association of Realtors (NAR) recently struck a massive settlement that could change the way realtors are paid. This regulatory uncertainty may be contributing to investor concerns about the company's future prospects (National Association of Realtors, 2024).
6. Analyst Downgrades: In January 2024, Zillow's stock was downgraded by BofA Securities analyst Curtis Nagle, citing valuation concerns and uncertainty over the outcome of commissions lawsuits. This downgrade may have contributed to the stock's decline (Wall Street Journal, 2024).



Zillow's struggles with iBuying and its history of losses have raised concerns about the company's long-term profitability. To improve its earnings and profitability, Zillow is focusing on expanding its revenue streams, improving operational efficiency, leveraging its core competencies, pursuing strategic acquisitions, and diversifying its business model. By implementing these strategies, Zillow aims to enhance its earnings and profitability in the future.

As an investor, it's essential to stay informed about the company's progress and assess the risks and opportunities associated with its business model. While Zillow's recent struggles may be concerning, the company's long-term prospects could still be promising if it successfully executes its turnaround plan.