Not everyone is excited about the new Trump administration, but the National Association of Home Builders' Housing Market Index shows homebuilders like KB Home (KBH) and Pulte Group (PHM) are bullish — and real estate marketplace provider Zillow (Z) stands to benefit if that enthusiasm proves to be well-founded.
While mortgage rates rose sharply after Donald Trump's election, the Housing Market Index spiked to an 11-year high of 69 in December. The index eased back to 67 in January, but remains well above the 50 benchmark that marks the difference between optimism and pessimism. On Thursday, the Commerce Department said December housing starts spiked 11.3%, topping analyst estimates.
Triple-Digit Earnings Growth
Founded in 2006, Zillow connects real estate professionals with homebuyers, sellers and renters, and provides "Zestimates" of home values for around 100 million properties.
Earnings growth has been erratic, but the Seattle-based company has posted triple-digit EPS gains in five of the last eight quarters.
Annual sales growth has averaged 72% over the last three years, including a 27% rise in Q3.
Zillow is expected to report Q4 numbers around Feb. 9.
The stock has a less-than-ideal Composite Rating of 69, partly a result of its D+ Accumulation/Distribution Rating and mere 1% return on equity.
But a 1.4 up/down volume ratio and three quarters of rising fund ownership point to demand for the stock.
Raising The Roof?
After a short climb following its August 2015 IPO, Zillow sold off sharply for four months.
After hitting a bottom last February, Zillow went on a tear, closing higher for 20 of 24 weeks while rising 157% from the low.
The stock is now testing support at its 10-week moving average as builds a cup-with-handle, and closed just above that benchmark on Friday.
Look for the 10-day moving average, which has been drifting lower, to stay above the 50-day line, and see if Zillow can raise the roof on its base and clear the 39.15 entry in heavy volume.
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