Zillow is a great company. There's no doubts about it. However, the current stock price is based on a lot of "ifs". If one of these "ifs" doesn't occur, or if the overall market crashes, Z will hurt the most. However, if all the "ifs" happen and if the market keeps going up, Z will go up a little bit more.
If we assume the chances of going up or down is 50%, the possible gain will be much less than the possible loss. I don't think any wise individual or institutions would ever try to buy Z at the current price level. This is either a short squeeze, or someone trying to manipulate the market with useless upgrades and marketing tactics.
Those buying Z at $130 are banking on "the greater fool" theory. The only question in my mind is how long the manipulation will last. When Z pulls back, it's going to be one helluva stampede for the exits.
Sentiment: Strong Sell
I have been on the short side for months, but I had to reduce. The only thing that keeps me short some Z is being long TRLA, That has worked like a charm these last few weeks. The valuation disparity is still pretty dramatic.
Right now the contrarian side of the trade is being long. Everyone knows that valuations will never be justified no matter how much their revenues grow. Even through vertical integration with TRLA: it would be one colossally overvalued company taking over a very overvalued company meeting halfway at "sky-high" valuations. The pricing and valuations at this level are a throwback to the tech bubble days.
On top of everything, this isn't even much of a short squeeze. Look at the short sale publications. Virtually no change in net shorts (as of 2 weeks ago). It says that the shorts are in a bind here.
This will end at some point and it will be a slaughterhouse when it does. The shorts with strong hands will win, as always. I remember the same thing happening with YELP at highs, RAX when it was above 80, DDD in the 70s/80s, SSYS, CROX, UNXL, BVSN, ZU, VISN, etc etc etc - I've seen this many times and profited through it. I'll see it again here. I would bet my life on it.
Sentiment: Strong Sell
I agree, shorts will do very well if they hold on. The stock like every other start-up will go back to IPO price. Z will see 30-40 again in less than 5 months. Short term it may pullback to 100. But anyone who enters long around 100 will be sorry holding a big bag. I will be out of my long trade today, because tomorrow may be beginning of the end of the uptrend for the indices.
I agree. When I see upgrades after a stock has already run I get out as fast as I can. Long term, I think this has much more room to run but it's going to correct hard back to the low 100's. That would be a good buying opportunity. I think the overall market is due for a nice correction so these high flyers are going to take a beating but ultimately they will recover. If you are looking long term, nothing to worry about but why not take advantage of the moves?