Zillow Inc (Z), Trulia Inc (TRLA) – The Housing Recovery: Two to Buy

Page 1 of 2

Zillow Inc (NASDAQ:Z)The housing recovery seems to be in full swing; strong enough that there are whispers of an impending mini-bubble on the horizon. While there has been tremendous growth in housing over the past year, the risks of a downturn seem inflated. Motley Fool contributor Morgan Housel discusses this in more detail here, with the key points being that affordability is still relatively high, and between bank-owned properties being put up for sale at a slow rate, and homebuilders still ramping up new construction, there seems to be plenty of pent up demand that will be sustainable for years.

And this is creating some great opportunities for investors to profit, and in more ways than you’d think. Let’s take a look.

If you’re looking for a home, you’ll probably look here

Zillow Inc (NASDAQ:Z) has only been a public company for two years, and shares are up more than 140% in that time, and an incredible 206% YTD. While such a sharp run-up, on the surface, makes Zillow Inc (NASDAQ:Z) look like just another overvalued tech stock, let’s take a look closer at what makes Zillow Inc (NASDAQ:Z) appealing.

With a market cap of less than $3 billion, and TTM revenues of $116 million, there is a long runway of growth ahead, and plenty of room for shareholders to make money. As an added benefit, the company is already profitable, with $5.9 million in net income over the past twelve months. Compared to competitor Trulia Inc (NYSE:TRLA)’s $92 million in revenue and net loss of $7.7 million over the past 12 months, you can see why Zillow Inc (NASDAQ:Z) is a more attractive investment.

Zillow Inc (NASDAQ:Z), at over 55 million unique visitors per month, has nearly double the monthly traffic of Trulia Inc (NYSE:TRLA). And per Alexa, these visitors stay longer and visit 50% more pages on the website. This is a substantial advantage, as users that stay longer and visit more pages drive more revenue and more profits. The value of Zillow Inc (NASDAQ:Z)’s network effect should only grow stronger as housing demand accelerates, and it appears to have a strong head-start over Trulia Inc (NYSE:TRLA) that it’s building on. Earnings on August 6 will tell us even more, but the evidence is strong that Zillow’s is further separating itself from the competition. One word of warning about profitability: As of this writing, there are rumors that management is planning to spend aggressively on growth in the upcoming quarters. While this could have a short-term impact on profitability as the effects take time to lift the bottom-line, it will strengthen the long-term prospects. Additionally, it could create a nice buying opportunity if the market responds poorly.

Given time, Trulia Inc (NYSE:TRLA) could become the Pepsi to Zillow’s Coke. But with this market still in its infancy, the smart bet today is on the first mover. Let the market play out before expecting there to be two investments. Keep an eye on Trulia Inc (NYSE:TRLA), but it’s too early to project success for both companies.

Potential to build upon

Homebuilders like Meritage Homes Corp (NYSE:MTH) have taken investors on a ride this year, with at least six periods where the stock has gone up 10% or more in less than two weeks, only to match it with the same number of drops of 10% or more. But through all the volatility, shares are up more than 23% YTD, outperforming the S&P by a slim margin on the back of strong demand for new homes.

Page 1 of 2
blog comments powered by Disqus
Insider Monkey Headlines
Insider Monkey Small Cap Strategy
Insider Monkey Small Cap Strategy

Insider Monkey beat the market by 52 percentage points in 24 months Click to see monthly returns in table format!

Lists

10 Cities with High Demand for Nurses

6 of the Worst Greeting Card Messages Ever Crafted

6 Ways to Make Money in ArcheAge and Build Your Empire

10 Foods To Eat To Lower Cholesterol Levels

The 10 Most Hated Television Characters of All Time

The 30 Worst Halloween Costume Ideas Ever Brought to Horrible Life

10 Vocational Skills in Demand Today with Jobs Waiting to be Filled

10 Best Places to Visit in Central and South America

The 10 Greatest Empires in History Which Nearly Conquered the World

The 6 Cheapest Boarding Schools In America 2015

5 Clear Reasons LoL is Better than DotA, Continues to Rule MOBAs

The Only 9 Teams with a Chance to Win the Super Bowl

The 15 Most Common Phobias in America that Induce Fits of Panic

Top 6 Least Expensive Tourist Destinations in 2014

Jim Goetz, Peter Fenton, Jim Breyer: Top 6 Venture Investors for 2014

Top 15 Billionaires in 2014

5 Pitfalls To Avoid When Buying a Franchise

Top 20 Medical Schools in the US – 2014 Rankings

4 Business Strategies that Turned Jamie Oliver into the World’s Richest Chef

6 Qualities That Make You A Good Team Player

10 High Paying Seasonal Jobs in America this Holiday Season

The 10 Busiest Shipping Lanes in the World

5 Most Valuable Brands in China

The 10 States with Highest Substance Abuse Rates Crippling Their Populace

The Top 10 Things to Do Before You Die That Will Echo for Eternity

The 10 Best Selling Items on Etsy

Top 10 Things to Do in Tokyo, the Greatest City in the World

10 Mistakes on Social Media that Can Harm You and Will Probably Get You Canned

The 10 Best Cities to Find Jobs in 2014

The 10 Most Controversial Songs Of All Time to Hit (and get Banned from) the Airwaves

The 20 Biggest IPOs in US History

The 10 Best Places to Visit in Mexico that Are Beautiful and Safe

7 Bad Habits that Age You Beyond Your Years

The 40 Best Fortune Cookie Sayings That Will Leave You Bemused, Befuddled, or Beguiled

10 Foods to Eat Before a Workout to Make Every Drop of Sweat Count

The 5 Best Documentaries On Netflix You Must See

The Most Heartwarming and Inspirational Story Of This Halloween Season, It Will Make You Cry and Jump For Joy

10 Best Party Songs of All Time to Bring the House Down With

5 New World Order Conspiracy Theories that Will Strangle the World

The 10 Highest Rated Movies of 2014

The 10 Largest Container Shipping Companies in the World

The 10 Largest Armies in the World: Who Should We Be Afraid Of?

Best Warren Buffett Quotes on Money You Need to Hear

The 10 Highest Suicide Rates by Profession

The 20 Most Underrated Movies of All Time

The 10 Fastest Growing Companies in America

The 10 Biggest Outlet Malls in USA

The 5 Most Popular Rap Songs of All Time

The 10 Countries that Eat the Most Meat

The10 Most Expensive Countries to Fly To

Subscribe

Enter your email:

Delivered by FeedBurner

X

Thanks! An email with instructions is sent to !

Your email already exists in our database. Click here to go to your subscriptions

Insider Monkey returned 47.6% in its first year! Wondering How?

Download a complete edition of our newsletter for free!