Signs Point to Further Gains in Housing Trends

Residential real estate has been a strong performer in the past year. Sales trends suggest that home prices will continue to appreciate as demand remains strong and supply remains tight.

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  • That bodes well for a number of companies that play to housing trends. That’s why most names in the space have beaten their quarterly estimates so far, and why they’re likely to perform well in the months ahead.

    One such play is Zillow Group (Z). The company saw revenue rise 8 percent over the past year, and the company’s guidance came in as expected.

    Even with this strong operational performance, shares have come down from a high of nearly $200 at the start of February to under $115 today.

    The company’s real estate data and analytics as well as related services are likely to continue to fare well as demand for residential real estate remains robust.

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  • Despite the weakness in recent months, shares are still up 180 percent over the past year. With strong earnings and an analyst upgrade, shares may shake off their recent poor performance and start trending higher.

    Action to take: The company isn’t quite profitable, but is nearing profitability, which may be a boon for shares in the months ahead. As the company pays no dividend, share buyers are betting strictly on a rally from here.

    For options traders, the recent earnings numbers could bode well for a short-term bounce higher. The August $125 calls, going for under $10 per contract could provide mid-double-digit profits in the coming weeks on a rally in shares.

     

    Disclosure: The author of this article has no positions in the stock mentioned here, but may make a trade on this company after the next 72 hours. The author receives no compensation from any of the companies mentioned in this article.

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