Zillow experiences growth due to optimistic outlook and unexpectedly high home sales.

• Zillow announced that it is slowing down its home-flipping business, selling houses at a faster pace and with better profit margins than expected.
• The company's fourth-quarter revenue surpassed expectations and it forecasted a positive outlook for the first quarter.
• Since reaching a record almost a year ago, the stock has lost three-quarters of its value.

The digital real estate company's shares soared by up to 20% in extended trading on Thursday after it announced that it was exiting the home-flipping business more efficiently than anticipated.

Zillow's fourth-quarter earnings report comes after a difficult period for the company, following its failed attempt to enter the iBuying market by purchasing homes directly from owners. In November, the company announced it was exiting the business, acknowledging that its algorithms were unable to accurately predict housing prices, putting the entire company at risk.

Despite losing $528 million in the year and $261 million in the fourth quarter, entirely due to the homes business, Zillow sold 8,353 homes in the period, surpassing its forecast of approximately 5,000 sales, and ended the quarter with about 10,000 homes in inventory.

"Our iBuying business has seen significant progress, with homes being sold faster and better unit economics than anticipated, making us more confident in our decision to exit and eliminate housing market balance sheet risk," wrote Zillow CEO Rich Barton in the quarterly shareholder letter.

In November, Zillow announced it was cutting approximately 25% of its workforce.

The revenue of $3.88 billion for the fourth quarter surpassed the average analyst estimate of $2.98 billion due to the faster pace of home sales, with more than 85% of revenue generated by the iBuying division and the rest coming from the home listings group called IMT.

In the fourth quarter, IMT's revenue increased by 14% to $483.2 million, just barely surpassing the average estimate of $481.9 million, as reported by FactSet.

Zillow anticipates revenue between $3.12 billion and $3.44 billion for the first quarter, which is below the analysts' projection of $3.26 billion.

Zillow is refocusing on its core business of connecting buyers and sellers through its marketplace, utilizing technology and tools to streamline the process. Additionally, the company is collaborating with a large network of agents and providing mortgage assistance to consumers.

By 2025, the company anticipates generating $5 billion in revenue with a 45% adjusted profit margin.

We recognize that the past few months have been difficult for everyone, including Zillow leadership, employees, and investors. However, innovation is a challenging journey.

Despite being down 24% this year, the stock reached a high of $59.04 after hours on Thursday.

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