Zillow and Trulia are on a growth tear, their “market caps” — the value of outstanding common stock — soaring into the stratosphere in 2013. But like their older sibling, Move Inc., the companies have lost money, overall, since launching.
The three big listing portals all employ a similar business model — selling leads, advertising and tech services to real estate agents. And if Move has racked up a $2 billion net accumulated loss in its 20-year life, why do analysts think the younger startups will not only survive, but thrive?
| Move (founded 1993) | Zillow (founded 2005) | Trulia (founded 2005) | |
| Net accumulated loss through 2012 | $2.0 billion | $71.7 million | $47.1 million |
Sources: Move, Zillow and Trulia 2012 annual reports.
The answer is projected growth, a focus on consumers, and faith in a new breed of management, analysts who follow the three companies say.
Looking back at the most recent four quarters, Move is still the leader in revenue. But Trulia’s market cap is nearly three times Move’s, and investors think Zillow is worth about six times as much as Move. In 2012, Zillow booked about $6 million in profits on $117 million in revenue, while Trulia lost $11 million on $68 million in revenue. According to its most recent annual report to investors, Move made $4.7 million on $199 million in revenue.
Revenue, market caps and projected revenue growth
| Company | Revenue, four quarters through second-quarter 2013 | Market cap, Aug. 9, 2013 | Projected 2013 revenue growth, percent |
| Zillow | $152.1 million | $3.24 billion | 60.0% |
| Trulia | $92.8 million | $1.41 billion | 73.3%* |
| Move | $213.9 million | $553.2 million | 14.2% |
Source: Google Finance and firms’ earnings call transcripts. *Estimate generated by projecting 60 percent Q4 year-over-year revenue growth, in line with recent quarters, and using the midpoint of Trulia’s projected Q3 revenue: $31 million.
Their revenue might be less, but Zillow and Trulia’s blazing growth, both in terms of revenue and Web market share, trumps that of Move and realtor.com, which is operated by Move under a special agreement with the National Association of Realtors, through the second quarter.
“Investors are always going to pay more for growth,” said Bradley Safalow, founder and CEO of stock analysis firm PAA Research LLC, who covers all three companies.
Aaron Kessler, a stock analyst who covers Zillow for Raymond James Financial Inc., agreed: Zillow’s faster growth accounts for its much higher relative valuation.
The price of a share of Zillow stock has shot up 233 percent this year, and Trulia’s share price is up 158 percent. Move, too, is up 77 percent, as the housing rebound has stoked investors’ interest in many companies whose fortunes are tied to the real estate sector
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