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ZipRealty And Move: Improving, But Still Loss-Making

Posted on Thursday, Apr 15th 2010

The real estate sector finally seems to be recovering in many parts of the United States. According to ZipRealty’s recent report, the number of homes listed for sale in 27 metropolitan areas grew 4.2% over the previous month in February. However, there is still a long way to go. Compared with a year ago, inventory in these areas was down 19%. But this inventory data does not capture the entire potential housing supply. Reports estimate that there are around 8 million homes for which owners are either behind on their mortgage payments or in the process of foreclosure. These homes are most likely to be put on the market as banks foreclose or owners are forced to sell.

ZipRealty’s (NASDAQ:ZIPR) Q4 results also reflected the positive beat. For the quarter, revenues of $33.9 million grew 35.4% over the year. The company reported a net loss of $0.11 per share compared with a net loss of $0.14 per share a year ago.

For the quarter, ZipRealty closed $1.47 billion worth of real estate transactions compared with $1.07 billion worth a year ago. The total number of transactions grew to 6,355 from previous year’s 4,335, resulting in a 9% drop in net transaction revenue per close. The company ended the year with 3,085 ZipAgents, up from 2,816 agents last year and down from 3,205 in the previous quarter.

The company ended the year with revenues of $123.1 million compared with $107.5 million a year ago. Loss per share remained flat at $0.64 for the year. With 35% growth in the number of transactions, Zip reported $5.30 billion worth of transactions closed during the year compared with $4.64 billion closed a year ago. However, the average net transaction revenue per close for the year fell to $5,227 from $6,145 in the prior year.

ZipRealty is focusing on attracting customers through free applications for iPhones and Google Android phones. The applications simplify the home-buying process for consumers by letting them search for actively-listed “for sale” homes and view photos of the listing in over 4,000 U.S. cities and neighborhoods. It also displays the results on Google Maps and gives a comprehensive list of recently sold homes in the neighborhood with their sale prices.

ZipRealty also launched a new application for the iPad. Similar to the phone application, the iPad users will be able to see information on the “for sale” listings and see the search results on Google Maps.

With its recent partnership with eRealInvestor, creator of a real-time, Web-based analytics solution for real estate investors, ZipRealty has become the first national brokerage company to provide a research tool to assist buyers who are searching for investment properties. The “Investors’ Info” tab is embedded on each listing on the ZipRealty site and is powered by eRealAnalyzer. It provides investors and homebuyers with detailed information to help assess the property’s short-term and long-term investment potential. The tool allows buyers to compare properties, estimate monthly cash flow, and calculate potential return on investment with variable inputs of down payments and interest rates.

ZipRealty projects revenue growth of 10%-20% over the year with net loss expected to be narrower than the 2009 net loss.

The stock is trading at $4.73 with a market capitalization of $96.72 million. It had reached a year high of $5.47 earlier last month.

Move (NASDAQ:MOVE), however, continued to languish even in the recent quarter. Revenues for the quarter fell 14% over the year to $49.6 million. The company reported a loss of $0.03 per share compared with a loss of $0.02 suffered a year ago and full-year revenues of $212 million compared with $242 million earned a year ago. Move lost $0.08 per share, which is a significant improvement over the loss of $0.23 a year ago.

Move has been focusing on making significant operational changes to help it turn around. After hiring Steve Berkowitz as CEO last year, the company is building a new management team. Under Berkowitz’s leadership, Move is also launching new real estate professional products to gain market share. The company has already launched tools such as Search Assist, Realtor Facebook widgets, Ask a Realtor, Realtor blogs, and the Real Estate Search iPhone app to expand its online footprint. Move’s iPhone application registered 300,000 downloads in 50 days.

The company is also expanding its marketing partnerships with real estate brokerage companies and has tied up with Century 21 and The Realty Alliance to increase listings exposure for tens of thousands of real estate professionals around the country.

But despite these efforts, Move isn’t expecting its numbers to improve soon. Q1 revenues are projected at $48 million, 11% lower than the previous year. Revenues for the year are expected to be $186 million–$192 million with EBITDA of 10%.

The stock is trading at $2.21 with a market capitalization of $344.22 million. In September of last year, it touched a 52-week high of $3.18.

The economy is reviving, and the government is trying to help boost the real estate sector by extending the tax credit for first-time home buyers till June 2010. However, it remains to be seen how soon the industry will return to its earlier peaks and for players such as ZipRealty and Move to again become profitable.

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