Zillow Group Inc (NASDAQ:Z) stock hit over $90 on this morning’s market as rumors that the firm was the subject of a buyout bid circulated. A surge in trading volume just after the stock opened on Friday morning may have been caused by the rumors, or it might have caused them. Stock in the real estate listing firm has lost more than 14 percent since the year began.
The most common rumor this morning was that Google Inc (NASDAQ:GOOG), (NASDAQ:GOOGL) was going to make a bid for the firm. Twitter Inc (NYSE:TWTR) was also up this morning and rumors of a Google buyout were also said to be the source of that spike. The Mountain View firm is unlikely to acquire more than one firm this week, and at least one, but probably both, of the rumors is likely false.
Zillow ramps up after fall
The rise in shares of Zillow Group Inc this morning comes after a long hard fall for those holding shares in the firm. Shares have lost more than 30 percent of their value in the last year, and hit all time highs in the middle of 2014.
In a report released on June 16, Oppenheimer analyst Jason Helfstein kept a Perform rating on Zillow, but said that the firm could face traffic issues as comScore data showed that visits to the site were slowing. Mr. Helfstein warned that slowing traffic may mean a higher ad spend by the firm.
That would cut into margins at a firm that has a less and less stable business model. On Wednesday Zillow CEO Spencer Rascoff told CNBC that he liked the long term business model at Facebook. That kind of model is not working for Zillow shareholders right now.
On Thursday RBC Capital analyst Mark Mahaney weighed in on Zillow’s trouble. He said that the firm’s buyout of Trulia has caused problems, the “long acquisition approval process caused something of an atrophying among both Trulia customers and employees,” according to Mr. Mahaney. He has a $103 price target on the firm.
Google becomes clarion call for losing investors
When a stock spikes these days it’s not unusual to hear that Google has come looking to buy it. Google hasn’t, however, made a big buy in a long time. The last time it broke $500,000,000 was when it bought out DropCam in June of last year. The last time it broke a billion in a single buy was the $3.2 billion bid for Nest Labs in 2013.
Over at Inman.com on Thursday Brad Inman took a look at the rumor that Google might make a bid for Zillow. He wrote that “My nose tells me something is marinating at Z, and it may or may not be another “Oh my gosh, are you kidding!””
He also took a look at some of the ways in which Zillow and Google are already aligned, saying, “Both rely on search to earn their living; both are laser-focused on the consumer; both depend on industry advertising.”
Inman said that Google is already earning a lot of money from real estate, and it’s unlikely the firm will jump into Zillow as a result.
Google isn’t going to buy every firm that’s in trouble and though it’s easy to see why Sergey Brin and Larry Page might see value in both Twitter and Zillow, the firm is unlikely to make a sudden move for either. That’s not to say that there is no deal in the works, but the abundance of failed rumors makes each new story less and less likely to be real.
For the time being it’s safe to assume that today’s breakout was lead by a big buy into Zillow, and that the rumors of a Google buyout were generated after the stock started to rise. Those buying into the firm on the hopes of a Google buyout are taking a huge risk.