Is Zillow Breaking Down on Housing Troubles?

Zillow (Z – NASDAQ)

Wednesday, September 25, 2013

If real estate is so hot, why does Zillow (Z – NASDAQ) look so dangerous right now?

The occasionally controversial research outfit, Citron Research, just put out a report labeling Z “a complete disaster” because “its rapid top-line growth is only due to skyrocketing sales/marketing spend (now 70% of revenue).”

The report also notes over $1 million in recent insider selling, indicating to Citron that the folks who know the company best like the company least.

So far, the return of real estate prices has allowed Z to blow off complaints. But what will happen if Z loses that fig leaf to rising interest rates and fading real estate sales?

Z 092513

Bottarelli Research Tip: Z has gained as much as 351% over the past year. But that rally has not been without its interruptions. Fall 2012 saw Z get cut in half, and it lost a quarter of its value last spring. Price is already rolling over again, and we expect that this drop will carry shares down to the 38.2% retracement at $71.34.

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