(MarketWatch) Zillow Group Inc. shares fell more than 15% in premarket trading on Wednesday following concerns that most of the homes it had purchased were worth less than initial cost.
KeyBanc analyst Edward Yruma faulted the company’s homes, saying that 66% of 650 listed homes were being sold below the purchase price, with an average of 4.5% discount.
Yruma says Zillow leaned into home buys at the wrong time and he believes the earnings may be at risk due to its current inventory worth about $1.17 billion in the second quarter of 2021.
The analyst says San Diego, Phoenix, and Meza, Arizona had the highest percentage of homes listed at below the purchase price
Yruma says while he thinks the issues facing Zillow are transitory, the company made compromises in relying on proper market data in home purchases. The analyst maintained a neutral rating on stock, which he has held since February 2020.
ZG: NASDAQ is down -15.07% on premarket.
