Zillow Inc (Z) Become the Next $10 Billion Online Company?

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This example also highlights how Zillow could reach an inflection point to where revenue growth accelerates as more users jump on board and advertisers flock to the service

HomeAway and Trulia consolidation

Investors probably don’t need to look much farther than other startups in the sector to see the ability to consolidate the market. While Trulia competes more head to head with Zillow to provide tools to research homes for sale, HomeAway, Inc. (NASDAQ:AWAY) provides information on vacation rentals as an ancillary business.

These two stocks have a market value of around $3.6 billion and revenue approaching $450 million this year. In fact, HomeAway, Inc. (NASDAQ:AWAY) has a revenue base around double that of Zillow with expectations of hitting nearly $90 million in quarterly revenue in this quarter. Also, HomeAway, Inc. (NASDAQ:AWAY) has been solidly profitable for a few years with expectations for further growth.

Trulia is the smallest and fastest growing of the trio with revenue appreciating around 65% over 2012 levels. Analysts expect earnings to surge to $0.71 next year, but the stock trades at roughly 50 times those estimates so it doesn’t offer much value at this level.

Combined the trio is valued around $6 billion so naturally some consolidation in the sector and a developing leader could grab huge revenue without the market growing just by becoming the default website for all real estate needs.

Bottom line

Anybody that has used Zillow Inc (NASDAQ:Z) to locate a new property or estimate the value of a house realizes the power of the online service. When comparing it to public examples such as LinkedIn or TripAdvisor one quickly sees where the $10 billion valuation is not only plausible, but could come quicker than most think.

The article Will Zillow Become the Next $10 Billion Online Company? originally appeared on Fool.com and is written by Mark Holder.

Mark Holder and Stone Fox Capital Advisors, LLC have no positions in any stocks mentioned. The Motley Fool recommends HomeAway, LinkedIn, and Zillow. The Motley Fool owns shares of HomeAway, LinkedIn, and Zillow. Mark is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.

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