Gublo
Small/Mid-Cap Trader, Multibagger/Penny Stocks, Earnings Analysis & Signals
Zillow, Rocket Companies, Intercontinental Exchange and UWM Holdings stand to gain from a strengthening US housing market. Per @KobeissiLetter, pending home sales jumped 9.6% year over year in the four weeks to May 10, to 346,104, the highest since September 2022, with gains across nearly every major metro as mortgage rates fell for three straight weeks in April. x.comÂ
Zillow is a Stage 4 stock in a clear downtrend, a reminder that a company can post decent numbers and still be a terrible stock. Rallies keep failing, and a recent bear flag preceded a 25% drop to new lows over six weeks. Housing stocks lack a favorable backdrop with mortgage rates above 6%. Down 67% from its highs, Zillow needs a 203% gain to break even, and laggards like this drag on performance. x.comÂ
The market looks further ahead than today's weak housing conditions, so Rocket Companies and Zillow look bottomed. Both appear poised for big runs despite how bad the housing market remains. x.comÂ
Zillow's real lock-in is winning in rentals and mortgages, which the market does not see. As with Spotify in 2023, the stock is hated while the company outgrows its market, operating leverage kicks in and layoffs have been announced. If housing volume recovers and residential growth reaches 20%+, it becomes a rocket ship. x.comÂ
Zillow looks very cheap after a very strong quarter with 18% revenue growth in a flat-to-down housing market. It is now a top-25 home loan originator, and while its push into Preferred changes revenue recognition, it still expects strong profits and double-digit growth. x.comÂ
Real estate stocks such as Rocket Companies, Zillow and Builders FirstSource will struggle to recover strongly until housing turnover increases. One possible offset: once rate hikes start, probably in September, 10- and 30-year Treasury yields and mortgage rates could tick down. x.comÂ
Ugly housing conditions provide the contrarian sentiment for a major homebuilder bull run over the next 12 months. Bears investing through the rearview mirror are going to be proven wrong. x.comÂ
Homebuilder stocks could fall close to 80% even if home prices drop only 30-40%, so the two shouldn't be compared directly. Real estate could be in for a rough couple of years. x.comÂ
Opendoor's record net loss undermines its investment case. Trailing net income has fallen to negative $1.521 billion, its worst level so far. x.comÂ
KB Home shows the housing recession is continuing: even with average selling prices down 5% year over year, deliveries fell 23%. Per @aviancapital, housing revenue fell 27% and backlog value 7%. x.comÂ
Homebuilder stocks are priced for a soft landing that the inventory data doesn't support. New home supply hit 10.3 months, the highest since February 2009, against a long-term median of about 6, after jumping a full month in May. In 6 of the 7 times it reached this level since the 1970s, the US was already in recession. Mortgage rates and record ownership costs keep buyers out, and when builders cut prices hard to clear supply, margins will take the hit and the sector will reprice. x.com x.comÂ