Zillow Tumbles After Posting Second-Quarter Loss on Costs

Zillow Inc. (Z), operator of the largest real-estate information website, dropped the most in three months after reporting a second-quarter loss on higher costs related to advertising and acquisition-related compensation.

Zillow fell 7.7 percent to $83.73 at the close in New York. The shares have more than tripled this year, compared with a 19 percent gain for the Standard & Poor’s 500 Index.

The net loss for the period ending June 30 was $10.2 million, or 30 cents a share, compared with a profit a year earlier, Zillow said in a statement yesterday. Excluding share-based compensation expenses, the company posted a profit of 1 cent, beating the average analysts’ forecast for a loss of 11 cents, according to data compiled by Bloomberg.

Zillow faces increased competition from Trulia Inc. (TRLA) and other providers of real-estate listings amid a U.S. housing-market recovery. Zillow has bought other companies to maintain growth and spending cash to diversify its products.

“They’re investing more aggressively in sales and brand advertising,” said Aaron Kessler, an analyst at Raymond James & Associates Inc. in San Francisco who rates the shares market perform, the equivalent of neutral. “That’s partially holding back better margins in the near-term, but these should improve going forward.”

Revenue climbed 69 percent to $46.9 million, compared with analysts’ prediction for $44.4 million on average. Zillow is forecasting sales of $186 million to $188 million this year, up from the previous outlook for $178 million to $182 million, Chief Financial Officer Chad Cohen said on a conference call yesterday.

Obama Meeting

The number of people visiting Zillow via its website and mobile devices reached a record of 61 million unique users in July, up 66 percent from a year earlier, the company said.

Chief Executive Officer Spencer Rascoff hosted a question-and-answer session with President Barack Obama on responsible home ownership today. Obama called for private capital to take the lead role in the nation’s mortgage market with the U.S. government continuing to provide a backstop only against catastrophic risk.

The president for the first time endorsed an approach to remake the housing finance system as Fannie Mae (FNMA) and Freddie Mac (FMCC) are wound down. He said the government still must play a role to preserve broad access to 30-year, fixed-rate mortgages that underpin the market.

“You can’t have a situation in which the government is underwriting and guaranteeing all the mortgage lending that’s taking place around the country and big profits are being made by these quasi-private institutions,” Obama said. Congress should pass housing legislation by the end of the year, he said.

Obama has done similar town hall meetings with Internet companies including Facebook Inc. and LinkedIn Corp., and he’s also fielded questions submitted on the popular online forum Reddit.com.

To contact the reporter on this story: Callie Bost in New York at cbost2@bloomberg.net

To contact the editor responsible for this story: Pui-Wing Tam at ptam13@bloomberg.net

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