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Today, Zillow Group, Inc. (NASDAQ:ZG) announced its decision to redeem all outstanding 1.375% Convertible Senior Notes due 2026, amounting to $498.8 million in principal. The redemption is scheduled for December 18, 2024, with the company offering a cash redemption price equal to 100% of the principal amount plus accrued and unpaid interest.
The notes, issued under an agreement with The Bank of New York Mellon (NYSE:BK) Trust Company, N.A. as of September 9, 2019, may be converted by holders into Class C Capital Stock at any time before 5:00 p.m. on December 17, 2024. The conversion rate is set at 22.9830 shares per $1,000 of principal, subject to the terms of the indenture.
Zillow has chosen a Combination Settlement approach for conversions post the redemption notice date, ensuring a specified dollar amount per $1,000 principal amount of notes is $1,000.
This move comes as part of Zillow's financial management strategies, with the company opting to address its debt obligations ahead of the original schedule. The redemption will effectively terminate interest accrual on the redeemed notes from the redemption date.
In other recent news, Zillow Group has been the focus of various financial developments. The company demonstrated a robust performance in Q2 of 2024, with revenues climbing to $572 million, a 13% increase year-over-year, primarily driven by the rental and mortgage sectors. Furthermore, Zillow completed an unregistered sale of equity securities, issuing 1,935,099 shares of its Class C capital stock and making cash payments totaling about $609.9 million, as part of its broader strategy to manage debt and equity.
Analysts have also weighed in on Zillow's prospects. Jefferies maintained a Buy rating on Zillow and raised the price target to $80 from $70, citing expected recovery in Housing Transaction Value and the potential for increased revenue from new products.
DA Davidson also maintained a Buy rating, raising the stock's price target to $71 from $52, due to the success of Zillow's Listing Showcase offering. Piper Sandler retained an Overweight rating and a price target of $62.00, while Cantor Fitzgerald initiated coverage on Zillow's shares with a Neutral rating.
InvestingPro Insights
Zillow Group's decision to redeem its convertible notes aligns with its strong financial position, as highlighted by recent InvestingPro data. The company's market cap stands at $13.99 billion, reflecting its significant presence in the real estate technology sector. An InvestingPro Tip notes that Zillow "holds more cash than debt on its balance sheet," which supports its ability to redeem these notes ahead of schedule.
Despite not being profitable over the last twelve months, another InvestingPro Tip suggests that "net income is expected to grow this year." This positive outlook, combined with the company's revenue growth of 9.4% in the last twelve months, indicates potential for improved financial performance.
Investors considering Zillow's stock should note its recent strong performance, with a 14.28% price return over the last month and a 29.97% return over the last three months. These figures suggest growing market confidence in Zillow's strategic decisions, including this debt management move.
For those seeking a deeper understanding of Zillow's financial health and future prospects, InvestingPro offers 12 additional tips, providing a comprehensive analysis to inform investment decisions.
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