Zillow Quits Home Buying Business; Stock Plummets

No less than 12 analysts dished out bear notes for ZG

Assistant Editor
Nov 3, 2021 at 10:57 AM
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Zillow Group Inc (NASDAQ:ZG) is plummeting today, last seen 18.2% lower to trade at $69.94, following news that the real estate firm is exiting the home-flipping game on the closure of Zillow Offers. The company said it could lose more than $550 million on homes purchased in the latter half of 2021, partly due to a faulty algorithm designed to profitably buy and sell homes, and will have to lay off around a quarter of its staff. Putting more pressure on the equity, Zillow reported top- and bottom-line misses for the third-quarter, and expects to lose an additional $240 million to $265 million in the fourth-quarter.

Analysts were quick to respond to the dismal news, with no less than 12 bear notes rolling in this morning. Truist Securities had the most noteworthy reaction, cutting its rating on ZG to "hold" from "buy," and slashed its price target to $83 from $140. These analysts join a split brokerage bunch, as nine of the 20 in coverage already called Zillow stock a "hold" or worse coming into today.

Put activity has ramped up in response, as well. ZG's normally quiet options pits have seen 3,209 puts across the tape already today, which is 32 times what's typically seen at this point and more than double the amount of calls traded so far. Most popular is the November 70 put, followed by the 60 put in the same monthly series, with new positions being opened at both. 

Zillow stock is trading at its lowest level since August 2020 and well below its Feb. 16 all-time high of $212.40. The formerly supportive 120-day moving average stifled a rally attempt in late October, and today's drop puts the security below a recent floor at the $85 level. Pacing for its biggest daily percentage drop since March 2020, ZG now sports a 46.7% year-to-date deficit.

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