Jerome Powell Helps Zillow Hit a 52-Week High—And a Legendary Investor Is All In with $100 Million

Zillow’s back in the headlines, but this time, it’s not because they lit $880 million on fire trying to become the Amazon of home-flipping in 2022. Just a couple years after their iBuying disaster left them holding a bag of overpriced houses, Zillow's stock is actually climbing now, thanks to better-than-expected earnings. Turns out, cozying up to Jerome Powell and riding the Fed's interest rate decisions might’ve given Zillow the big break they needed. Looks like they finally found a way to cash in that doesn’t involve burning through a billion dollars.

Zillow was on top of the real estate tech world, with its stock skyrocketing to over $208 in February 2021. Then, in a plot twist no one asked for, they decided to throw their hat into the house-flipping ring.—a move that aged about as well as Justin Timberlake getting frosted tips. 

Hit the fast forward button on the remote, and in November 2021, they shut down the whole iBuying (house flipping) mess after realizing that predicting home prices wasn’t as easy as, well, buying houses. Investors weren’t exactly eager to swipe right on a company that couldn’t stick the landing on flipping houses. The stock dropped like a rock, losing 90% of its value and hitting a low of $26.14 in October 2022.

But hey, Zillow didn’t throw in the towel. In fact, it's been making a pretty impressive comeback. As of this week, shares are sitting around $67.00, nearly 50% higher than they were just a few months ago. The stock even hit a new 52-week high of $68.34. Not too bad for a company that was left for dead not that long ago.

Zillow’s recent rise can largely be credited to the Federal Reserve. Last Wednesday, the Fed cut interest rates by 50 basis points, pushing Zillow’s stock up by 12.7% in just one week. The reason? Lower interest rates make borrowing more affordable, encouraging more people to buy homes. And with more home sales, Zillow benefits as agents spend more on advertising through their platform. Higher transaction volume = more ad dollars.

Here’s where things get even more interesting: you might not recognize the name Jay Hoag, but in the investing world, this guy is kind of a legend. He co-founded TCV, which just happens to manage $21 billion in assets. He’s also on the boards of Netflix, Peloton, and TripAdvisor—so yeah, he knows his way around tech. Oh, and he’s been on Zillow’s Board of Directors since 2005. Safe to say, if anyone has the inside track on what’s going on at Zillow, it’s Hoag. So when TCV dropped $100 million to scoop up Zillow stock earlier this month, people took notice. If Hoag’s putting down that kind of cash, there’s probably something going on behind the scenes that has him feeling pumped about Zillow’s future.

And another thing: Analysts, like Gary Alexander, are starting to warm up to Zillow again, too. He said that “a lot of factors are pointing in the right direction for Zillow,” especially with interest rate cuts potentially “unleashing a wave of pent-up demand for home-buying.” Translation: Zillow could see more traffic from people eager to buy homes before rates go back up. 

Here’s the big question: can Zillow keep this momentum going? Let’s not forget, the housing market itself isn’t exactly a cakewalk right now. Sure, mortgage rates have dipped, but they’re still higher than pre-pandemic levels, and if you ask any middle class family, home affordability is a huge issue for a lot of buyers. Plus, housing inventory is tight. So, while the rate cut is great for now, it's not going to magically fix the whole market overnight.

But hey, maybe the Fed will keep cutting rates, and maybe that’ll give the housing market a little more breathing room. If so, Zillow could be in a sweet spot to capitalize on all those buyers who’ve been sitting on the sidelines.

P.S. On Thursday, we released an alert exclusively for our premium members, and by market close, the stock skyrocketed 140.45%. If you missed this one, don’t worry—you don’t have to miss the next. Another big opportunity is likely to drop this week. Click here to become a premium member and get in before the next stock takes off!

Stocks.News holds a position in Zillow and Netflix.