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Sometimes, businesses try things and fail. Investors can be utterly unforgiving of failures, though, and lately Seattle-based Zillow Group (NASDAQ:ZG) has been Wall Street’s whipping boy as ZG stock continues to sink to new short-term lows.
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A couple of years ago, Zillow Group attempted to expand into the business of iBuying. This can be described as house-flipping on a mass scale, wherein companies make instant offers for homes, fix them up, and resell them (hopefully) at a profit.
Suffice it to say that Zillow Group’s expansion into iBuying was an unmitigated disaster. As a direct result of its ill-conceived iBuying venture, the company is taking a more than $500 million write-down and is laying off thousands of employees.
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However, sometimes disasters can lead to opportunities. As Zillow Group gets back to its core business as a digital real-estate marketplace, and as 2022’s housing market offers red-hot prospects, a powerful recovery may be in the cards.
A Closer Look at ZG Stock
Just for clarity’s sake, Zillow (NASDAQ:Z) is the Class C version of the stock, while ZG/Zillow Group is the Class A version.
It’s no exaggeration to say that 2021 was a rough year for Zillow Group’s long-term investors. There was a quick pop during early 2021’s short-squeeze mania, but that rally didn’t last long.
ZG stock topped out near $212 in February 2021, and it was all downhill from there. By August, the Zillow Group share price had already sunk below the critical $100 level.
The situation got even worse in early November. That’s because Zillow Group officially gave up on iBuying when it issued the company’s earnings press release on Nov. 2.
ZG stock traded for around $96 per share prior to that announcement. Afterwards, the shares quickly fell to the $60s.
Fast-forward to late January of 2022, and the Zillow Group share price is near $50. The last time it was this low was in May of 2020 before a massive bull market took hold.
Winding Down
Could another bull run happen this year? It’s entirely possible, but first Zillow Group will need to shake off its iBuying debacle.
Fortunately, it appears that the company is dusting itself off and moving forward. Indeed, by early December, Zillow Group had already made significant progress in winding down its Zillow Offers iBuying-business inventory.
Specifically, Zillow Group had sold, was under contract to sell, or had reached agreement on disposition terms for more than 50% of the homes it had expected to resell during the entire wind-down process.