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Why Zillow Stock Popped 23% This Week

Source The Motley Fool

Shares of Zillow Group (NASDAQ: Z) (NASDAQ: ZG), the online real estate platform, rose sharply this week after the company reported better-than-expected third-quarter results (which ended Sept. 30).

Zillow's share price was up by 23%, as of this writing, adding to the company's phenomenal gains of 94% over the past 12 months.

Solid quarter, despite a difficult housing market

The housing market has been stymied recently thanks to high mortgage rates and rising house prices, but Zillow's third-quarter results show the company can still thrive during difficult times in the market.

Zillow reported revenue of $581 million, up 17% from the year-ago quarter and ahead of Wall Street's consensus estimate of $555 million. The company also reported impressive adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) of $127 million, which was $24 million higher than the company's midpoint of guidance.

Zillow's management highlighted a few key contributors to its growth in the quarter, including its residential revenue that increased 12% from the year-ago quarter to $405 million. That jump came as "more buyers and sellers transacted with Zillow agent partners," the company said in a press release.

Rentals revenue was also a bright spot, rising 24% to $123 million. And the company's mortgage revenue saw the biggest gains, up 63% to $39 million.

Where Zillow is headed

Zillow's management issued revenue guidance for the fourth quarter between $525 million to $540 million, which represents an 12% increase at the midpoint.

This strong guidance, along with an impressive quarter, should give investors enough optimism that Zillow is on the right track. It's been a volatile year for the company's share price, but with the company's main revenue segments growing at a healthy clip, investors have much to celebrate right now.

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Chris Neiger has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Zillow Group. The Motley Fool has a disclosure policy.

Disclaimer: For information purposes only. Past performance is not indicative of future results.

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