Why Zillow Stock Crashed an Unlucky 13% Today

Zillow Group (NASDAQ: Z) (NASDAQ: ZG) stock tumbled 13.1% through 10:20 a.m. ET Wednesday, despite beating Wall Street sales forecasts in its earnings release last night.

Heading into the quarter, analysts forecast Zillow would collect $546.7 million in sales for its fourth quarter of 2024. In fact, Zillow reported revenue of $554 million.

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Zillow Group Q4 earnings

This was a pleasant surprise, and not only to analysts. Zillow noted that it, too, was surprised by its sales strength, which grew 17% year over year and exceeded the midpoint of the company's outlook range. This also marked an acceleration in sales from earlier in the year. For all of fiscal 2024, Zillow's sales grew 15% year over year, to $2.2 billion.

If only it could say the same about profits.

Zillow reported $52 million in net losses for the quarter, an improvement over the $73 million it lost in Q4 2023 -- but still a loss. Losses for the full year likewise improved in comparison to 2023. Still, Zillow lost $112 million in all of 2024. For every $1 in sales Zillow recorded, the company lost about $0.09 in Q4, and about $0.05 in all of 2024.

Is Zillow stock a sell?

This really shouldn't come as a surprise to investors. According to data from S&P Global Market Intelligence, Zillow stock hasn't earned a net profit since 2012. An unlucky 13 years of losses, to accompany the stock's unlucky 13% decline in stock price today.

Admittedly, Zillow is making money where it really counts. Free cash flow for the real estate stock was a strong $88 million in Q4, and totaled $285 million over the past 12 months. Still, on a stock valued at $17.6 billion that works out to a price-to-free-cash-flow ratio of nearly 62 times.

No matter how optimistic an investor you are, I'm afraid that's simply too much to pay for Zillow stock.

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Rich Smith 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.