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

The Top 10 Most Expensive Digital Cameras to Snap Stunning Shots With

The 10 Highest Quality Fast Food Restaurants In America Today

The 8 Best Halloween Decorating Ideas to Spook Up Your House

10 Marvel Women that Should Get a Movie Right Now

The 20 Best Remixes of Popular Songs that Will Make You Forget the Originals

7 Most Expensive Cities in the World

5 Least Expensive Cities in the World

10 Celebrities Who Believe In Scientology

10 High Margin Food Products to Build a Business Around

The 10 Most Expensive Clothing Stores in the United States to Get Decked Out At

The 5 Biggest Kickstarter Scams That Swindled Backers’ Donations

The 10 Most Expensive Boarding Schools In the World

50 Crazy Facts About Japan You Won’t Believe

Top 10 Least Expensive Hybrid Cars to Save the Planet With

The 10 Biggest ‘Gate’ Controversies in History

The 10 States with the Highest Nursing Shortages Leaving Their Hospitals Depleted

The 10 Best Value Investment Blogs that Every Investor Must Read

The 6 Cheapest Boarding Schools in Europe 2015

The 5 Most Expensive Cars To Insure in the World

The 10 Most Common Genetically Modified Foods

10 Self-Made Billionaires Who Came From Nothing

The 10 Most Expensive Cities to Live in North America

The 13 Most Expensive Headphones in the World to Represent

The Top 20 Wealthiest Soccer Teams in 2014

4 BuzzWorthy Cannabis Stocks And Some Smoking Derivative Plays

The 10 Healthiest Fast Food Chains in America to Dine At

The 5 Most Expensive Cat Food Brands You Can Spoil Your Kitty With

The 6 Best eCommerce Platforms for Small Businesses

The 10 Worst Mistakes an Entrepreneur Can Make

The 5 Most OP Characters in League of Legends to Carry Games and Crush Foes With

The 5 Best Foods to Eat Before Running that Will Help You Pound the Pavement

10 Glaring Plot Holes in The Walking Dead that a Zombie-Filled Bus Could Drive Through

The 5 Biggest Celebrity Stoners Who Love Their Reefer

The 10 Most Overrated Movies Of All Time by Out-of-Touch Critics

Top 6 Least Expensive Cruise Destinations For 2015 that Will Take You to Paradise

10 States with Lowest Substance Abuse Rates in America

The 14 Most Watched TV Finales Ever

The 10 Best Selling Role Playing Games of All Time for PC

10 Most Influential Papers In Economics

Top 8 Biggest Charities in the US

10 Worst Celebrity Career Moves Ever

Top 10 Best Paid Tennis Stars in the World

Top 6 Cities For The Ultra Rich to Live in Comfort

10 Cities with High Demand for Nurses

6 of the Worst Greeting Card Messages Ever Crafted

How 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

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!