Zillow Group sees the way to $ 20 billion in revenue over the next 5 years – The Fool Motley

Zillow Group (NASDAQ: Z) (NASDAQ: ZG) released its fourth quarter results on February 21st. The online real estate market has announced that its co-founder, Rich Barton, would come back as CEO while he embarked on a new aggressive growth plan.

Zillow Group Results: Gross Figures

Data source: press release on the results of the T4 2018 Group for Zillow Group. EBITDA = earnings before interest, taxes, depreciation and amortization.

What happened with the Zillow Group this quarter?

The massive audience of Zillow remains perhaps his most valuable asset. During the fourth quarter, more than 157 million unique users accessed monthly mobile apps and company websites. And throughout the year, people have visited Zillow's properties over 7 billion times. These figures represent growth from one year to the other of 4% and 14%, respectively.

Zillow monetizes his audience in many ways. For example, real estate agents pay to advertise on its sites. Revenues of the Company's principal agents increased 11% year-over-year to $ 221 million in the fourth quarter.

Property owners and managers also pay to advertise their ads. Zillow's rental revenues increased 21% to $ 34.9 million last quarter.

Zillow is also building a mortgage business. The company acquired Mortgage Lenders of America in late 2018 in order to accelerate its plan to become a national mortgage lender. Zillow Mortgage Loan revenues jumped 26% to $ 23.3 million.

Still, Zillow's new home buying and selling business may have even more potential than all of its other combined segments. This part of Zillow's operations is just beginning; the company bought 499 homes and sold 141 of them through Zillow's fourth quarter offerings. This resulted in a loss of $ 20 million from adjusted EBITDA of $ 41.3 million. Management believes, however, that the company's housing sector could grow exponentially and generate revenues of billions of dollars.

Look to the front

Zillow has published financial forecasts for 2019, including:

• Total Internet, Media and Technology (IMT) sector revenues of $ 1.246 billion to $ 1.281 billion, of which $ 905 million to $ 930 million for leading agents.
• Mortgage income from $ 100 million to $ 115 million.
• IMT adjusted EBITDA of $ 241 million to $ 266 million.
• EBITDA adjusted mortgage loans from $ 32 million to $ 22 million.

The company also announced ambitious long-term goals for its advertising, mortgage and housing businesses. In three to five years, Zillow counts:

• Achieve annual revenues of more than $ 2 billion and adjusted EBITDA of $ 600 million in its LMI sector.
• Create more than 3,000 loans per month in its mortgage segment.
• Buy 5,000 homes a month, generating an annualized turnover of approximately $ 20 billion in its home segment.

Leadership changes

Rich Barton, the new CEO, will help Zillow to achieve these goals. Barton co-founded Zillow in 2005 and was CEO until 2010, when he became executive chairman. Barton replaces his co-founder, Spencer Rascoff, who will remain on the Zillow board.

Commenting on the transition, Barton said:

We created the Zillow Group in 2005 to facilitate the process of buying and buying real estate. Much of our initial dream is becoming possible. We are at an inflection point in this quest, and now is the time to shuffle the seats to management. I am delighted to be back as CEO. I am extremely grateful to Spencer for the tireless leadership that has brought us to this point and I am pleased that his continued support and advice as a Board of Directors will benefit.

Barton also shared his vision of what he thought would eventually become "a much larger integrated online real estate company":

In the past year, the Zillow Group has become a very different company. We are making strategic investments to expand the Zillow Group 's portfolio to further reduce the funnel of distance selling, thus offering "hyper – solicited" consumers today a complete range of products. 39 options for buying, selling, borrowing and leasing. The launch of the Zillow Offerings and the acquisition of Mortgage Lenders of America in 2018 paved the way for the purchase and sale of homes and loans. The addition of real estate transactions and, possibly, homogenous mortgages to the Zillow Group's portfolio positions us well for the next generation of real estate online and significantly increases our potential market.

Barton noted, however, that Zillow should invest a lot to make this vision a reality.

"2019 will continue to be a year of transformation and investment," Barton said. "We are building on our market leadership, the power of Zillow's brand portfolio and our culture of innovation to fuel our new businesses, while partnering with Premier Agents and the industry to delight consumers and set the stage for our next wave of growth. "

Joe Tenebruso has no position in the mentioned actions. The Motley Fool owns shares and recommends the companies Zillow Group (A shares) and Zillow Group (C shares). Motley Fool has a disclosure policy.