Careful betting against Zillow

The stock is overvalued, especially as a housing play, but this loved name is also a remarkably successful social, mobile and cloud play.

By Jim Cramer Aug 30, 2013 9:31AM

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For Sale sign board in front of a model home © Glow Images, Glowimages, Getty ImagesYou want power? You want strength? Take a look at Zillow (Z), the heavily shorted real estate Web play that is soaring. On Thursday, the shares were up $6 on the day and were trading well above where the company priced its $82 secondary. Considering that the secondary was poorly received initially and broke price immediately, this is a remarkable renaissance. It's the only part of the housing-real estate sector that's doing well -- even as it is by far the most overvalued of all the stocks in the industry.


By contrast, Realogy (RLGY), which represents 26% of all transactions, was barely up even as it put on its best face on "Mad Money" Wednesday night and sales continue to grow at a 17% to 19% pace. Realogy's now a plus $3 billion company and all it does is list real estate. Despite Realogy's $5 billion in sales, the company is valued at about $6 billion and is barely up this year.


Zillow, with $150 million in revenues, is worth $3.7 billion and is up 240% for the year. That's just a testament to how much people love growth as Zillow could grow revenues as quickly as 60% to 70% for the year. Oh, and did I mention it has no earnings?

You want another wild contrast? Apollo Group (APOL) exited Realogy at $47 and change in a gigantic secondary offering of 25 million shares. The stock's been down ever since then. But Zillow's secondary (also of insider stock) seems to have re-energized the stock after that initial decline.


I think this divergence has less to do with real estate and more to do with a dearth of multiple revenue stream Internet companies. Check out Yelp (YELP) and LinkedIn (LNKD), two other similar business models to Zillow. They just keep running and running.


Some of this is pure short squeeze. The shorts treated Zillow as a housing play and bet that it would go down with the homebuilders and Realogy. Turns out it is a kind of social, mobile and cloud play that's viewed as a remarkable success.


I think Zillow is overvalued. But like Yelp and LinkedIn, as well as Netflix (NFLX) and Amazon (AMZN), it is loved. Realogy might be undervalued and is hated.


Shorts: Be careful what you bet against. Zillow isn't a housing play. It's the latest and greatest use of the Web!

 

Cramer

 

 

Jim Cramer is a co-founder of TheStreet and contributes daily market commentary to the financial news network's sites. Follow his trades for Action Alerts PLUS, which Cramer co-manages as a charitable trust and has no positions in stocks mentioned.  

 

 

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62Comments
Aug 30, 2013 3:27PM
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I have a very uneasy feeling about this Syria thing Togs.  I firmly believe Putin has it in for Obama and the US.  This smells like a trap to me.  Putin does not buy into Obama's ideology.  He is a firm authoritarian and sees Assad as having the right to establish order over Syria.  I think actions could again incite even more anger and hate towards us.  Will any gains outpace the losses?  I do not want us to get started down this path.
Aug 30, 2013 10:37AM
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Yawn. The question about Zillow.  How many information sales/advertising revenue business models can we all stomach?  Pages are already crammed with too many ads. I would hope a look at diminishing returns might second guess the addition of just one more.  Overpopulation in anything is never a good thing. JMHO 

Aug 30, 2013 4:31PM
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Rome, Don't think you have to worry...?

We don't have a "draft" in today's world...

And I don't think in any way are we talking "boots on the ground."

 

My only concerns are repercussions here in the U.S. or abroad in other select Countries.

Correct, I believe or agree there is "no love lost" between Putin and Obama...

Putin is KGB....There is no such thing as EX-KGB...!! But Russia I guess needs a "strongman" in control and can't seem to function on the World stage without one.

Kinda like us having an ex- Military General, CIA, FBI, NSA or TSA(Homeland Sec.) In-Charge.

Recent times were Eisenhower and Bush #1, Reagan, thought he was because of Hollywood Roles.

Early times many Generals were Presidents, we have civilized ourselves maybe.?

Aug 30, 2013 1:20PM
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Mr Cramer, Mr Kerry did not address  why Syria is America's problem?  The UK has pulled out.  Only France might help.  The UK says no,so does China and Russia.  And how dare the WH say  they don't want war.  We are still fighting 2 wars. This is madness. Congress might stop the WH, The WH recommends tighter gun control,  yet it supports Drone attacks. Now it wants a third war.  Madness!!

Aug 30, 2013 1:05PM
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Is what it is.....I have many different opinions about Gold, Silver and other PGMs.

But for the most part would be "parroting" others and even myself.

The best site, I know to check out "Gold ideas" is kitco dot com..

Many articles and opinions about all Precious Metals, exchange rates, etc.

And up to the minute prices...Kitco is a Canadian Company and provider...They know their stuff.

Covering all World events and prices.

 

And about once a week Anthony Merryday, does a column here on MSN...

A couple others such as Fleckenstein, Brush and Jubak (old timers here) do also, with Fleckenstein being kind of a Contrarian and a GoldBug. When gold is making fairly wild swings, is when most of the articles are written here...(I expect one very soon.)

 

As far as Gold to $1900 doubt it will happen this year...Don't listen to all the hypers.

It has only "touched" slightly over 1900 in recent History and I believe that was an Intraday high.

Aug 30, 2013 3:55PM
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Wall St showed its worst side today -- pump and dump on the possibility of war -- some would  have a harsher description -- how shameful.  Mr Obama, I will not let you  put my 2 boys in harm's way!!
Aug 30, 2013 3:10PM
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I don't think Syria is only a U.S. problem...

But having said that, "the use of chemical weapons" should be a World problem...IMO.

The only thing worst then "chemical poisoning death is burning alive.." (napalm for instance, etc.)

NOTHING CAN SAVE YOU and CHANCES are YOU WILL DIE.

 

Being left it seems, with France( a very old ally, for 100s of years)...The chances of going alone are increasing...Many of these other Countries, have very large, vocal Islamic populations.

 

Being we have put or allowed ourselves to be in "position of World Cop"...This happens.

No one else has the balls to do anything; And then you have the Russia and China Factor also.

Aug 30, 2013 3:08PM
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I don't think Syria is only a U.S. problem...

But having said that, "the use of chemical weapons" should be a World problem...IMO.

The only thing worst then "chemical poisoning death is burning alive.." (napalm for instance, etc.)

NOTHING CAN SAVE YOU and CHANCES are YOU WILL DIE.

 

Being left it seems, with France( a very old ally, for 100s of years)...The chances of going alone are increasing...Many of these other Countries, have very large, vocal Islamic populations.

 

Being we have put or allowed ourselves to be in "position of World Cop"...This happens.

No one else has the balls to do anything; And then you have the Russia and China Factor also.

Aug 30, 2013 12:00PM
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how can MSN and CNBC retain any credibility when they let this clown babble on and on?
Aug 30, 2013 2:38PM
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E-mailed to my no-backbone Senators...

 

Funny... no impeachment news but Kerry is trying to tell us that 1,429 Syrians were allegedly killed by chemical weapons and we should all put our tin cups down, leave the street corner we are begging at and rally behind you losers and nuke 'em. 1,429 Syrians DIED. 90 million fellow Americans have been condemned to data-excluded DEATH by our zombie texter President... left to slowly fade without jobs, incomes, wrecked lives and families... while the likes of YOU collect salaries pensions healthcare nobody else has and get to make so many laws that no one human could recite them much less live by them. 83% of America want to drag you out into the street and force you to face the mess you created. You want to bomb someone... bomb Obama and save us from the Techno-Prez hoops fool. You WILL do as the people ask because you are our public servant. Impeach the stupid bastard and get fixing financial tyranny HERE, jobs blockades HERE, housing price control HERE and the forced assimilation of a FREE PEOPLE into a New World Order. YOU MAKE ANY MOVE TO ATTACK OR BOMB SYRIA AND AN ACT OF WAR IS DECLARED ON YOU.

Aug 30, 2013 11:45AM
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Like we warned yesterday after the close, be cautious today, its Friday and after the last couple of days we knew these manipulators would come out guns blazing selling, selling ad selling....Remember, that's how they make their dough. Now they are in charge on and off the floor so obviously things are not looking good at all....Lets hope this afternoon some kind of miracle occurs....More later.
Aug 30, 2013 5:22PM
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OBAMA QUOTE  ""NO BOOTS ON THE GROUND""
 Just CRUISE MISSILES, and maybe some F-117 strikes? That will really make friends!
When is this country going to learn to mind its own freaking business. You need a scorecard in Syria to keep track of the players!  If you back the” FREEDOM FIGHTERS” are you backing the MUSLIM BROTHERHOOD ? Or any other insurgent faction? IF THEY WANT TO GAS EACH OTHER FINE BY ME.  Did we learn anything from IRAQ ???
PELOSI SAID THIS IS A DIRECT THREAT TO THE U S A !!!! OMGLOL. WAR MONGER LIBERAL??
 Now with the Russians and Chinese involved,   this can blow up pretty quick.
 Let the Syrians find their own path. If you want to help, send some humanitarian aid.
And to stay on point, I did purchase 100 shares of Raytheon at 77.

Aug 30, 2013 12:48PM
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Cramer seems to have pretty thick skin...I think that may be a redeeming quality of his..

 

Certainly he takes a lot of name calling and ribbing here...

As many should know he has his TV schtick and Interviews..

His Investing newsletter, etc.

And writes columns for many other Financial or Money Sites.

And theStreetcom.

Aug 30, 2013 3:38PM
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It is way too hot to do anything but sit here and drink "sweet tea."

 

But me the dog and one cat have work to do....

 

Enjoy the weekend and Holiday, all...Remember it is "Labor Day"...

Have a nice one...

Ciao.

Aug 30, 2013 2:48PM
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Good Article about "Gold" just came on-line...Under "NEWS" tab and headlines, homepage MSN.

 

"Why Gold is making a Comeback" by Steve Rothwell..

 

Iswhatitis...Good reading, reaffirming what myself and LOM mentioned.

Check it out....

Aug 30, 2013 1:30PM
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Evil Chris...I don't know much about or follow Bonds....Have none at the time.

Had some Treasuries or Savings Bonds in early life and bought some for kids..

They use to have Bond drives years ago at work.

Have owned some or partials years past in Mutual Funds...Nothing outright now..

Only interest of late is in Munis...Or maybe tax-exempt types issued.

 

A buddy has some old ones, that are about to be called or something ??

He bought them years ago paying about 6-8%, but the date of expiration(?) has come and they will stop paying??....He has been very happy about it the last few years...Think they are Treasuries or Savings type...

 

There are many others on here that know a lot more about Bonds than I...

I think Active RIA, has some decent knowledge to that end, he usually only comes on later and not as often anymore....Good luck in your quest.

Aug 30, 2013 10:49AM
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Mr Cramer, a MSN headline asks  -- How is the Fed impacting the stock market?  What do you think? What also do you think about Syria':s impact on the Market?  What do you think about oil prices going up because of Syria?  Your thoughts on these issues would be of interest.

I would assume consumer confidence slid because of indecision over Syria,What do you think? The WH says it is listening to the American people ... is it?
Aug 30, 2013 5:56PM
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CL:Museltof !You came up with another right wing conspiracy.The Koch loves your type.
Aug 30, 2013 10:46AM
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Yes, The discussion and Article was mostly about Housing and that Sector's investments.

Radian and Realogy were the players that Cramer was writing about.

 

As usual the comments lasted for a short period discussing, some of the points..

 

And then turned quickly to "crapspeak"....

 

I was guilty also, discussing Sweet Corn, Casinos and Vet's Club.

Aug 30, 2013 9:46AM
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I thought some of this was just discussed at length yesterday..?  TGIF...
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