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What's going on?
On Monday, US online real estate marketplace Zillow announced weaker second-quarter results than investors had hoped for as well as an acquisition and, on Tuesday, the stock fell by 16%.
What does this mean?
Zillows sales in its rental business (where landlords pay to advertise available properties) fell short, leading the company to reduce its overall expectations for the year.
Last quarter, Zillow expanded into a new area buying houses directly, aiming to sell them on, once renovated but its new foray generated no revenue at all. That didnt stop the company doubling-down on its expansion efforts, as it bought Mortgage Lenders of America getting into the business of issuing mortgages, too.
Why should I care?
For markets: Zillows stock looks like its a fixer-upper.
Investors sold off Zillows stock in April, when it announced its plans to buy and sell homes wiping almost 10% off the companys value. They may have continued selling on Tuesday, as they questioned why the initiative was taking so long to deliver (especially when the US real estate market is booming). Zillow says its taking longer than expected to actually get its hands on the keys once it buys a home, which delays everything that comes after. But, with its new mortgage business, itll be able to help customers finance their home purchases too which may well speed things along.
The bigger picture: Zillows following a tried and true formula.
Companies adding a new string to their bow isnt unusual and it can be a good way to extend relationships with customers beyond a single transaction or service. Amazons a great example: it started off selling books and, nowadays, offers all kinds of things not to mention taking care of your music, video, and cloud storage needs.
Originally posted as part of the Finimize daily email.
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