By Frank Lara, Correspondent to 24/7 Wall St.
ZipRealty, Inc. (NASDAQ::ZIPR) finished the day at $5.74 a share, a fry cry from its 52-week high of $8.49. Today (10/11) they cut their revenue outlook for the rest of the year and plan to eliminate jobs to reduce operating expenses but you just have to ask – will that really help?
It’s no secret America, we are experiencing a nationwide real estate slowdown that is impacting homebuilders, lenders, would-be home buyers, and ZipRealty is experiencing the pain first hand. Foreclosure filings across the U.S. nearly doubled last month compared with September 2006 to a total of 223,538 foreclosure filings, up from 112,210 in the same month a year ago, according to Irvine-based RealtyTrac Inc. People are struggling to make mortgage payments so would you really expect people to be flocking to ZipRealty’s website to do commerce based Real Estate deals? Of course not.
ZIPR now expects revenue of $97.5 million to $102.5 million, compared with its earlier forecast of $105 to $110 million. Considering that analysts on average were expecting revenue at a gracious $111 million, the Street responded by dropping the stock by 12% today. It doesn’t matter that ZipRealty plans to cut jobs at its corporate headquarters and field offices if America isn’t buying and selling homes, how can they possibly improve the stock price?
ZIPR is a ticker that shows up too frequently in the biggest loser category on a weekly basis. They could trim the company to 10 employees, it’s still not going to cure America’s housing crisis. ZipRealty said it expects to lower operating expense by about $4 million annually, I say that’s not enough. Tighter lending standards, ridiculous prices and a standoff between home buyers and sellers are expected to drive home prices and sales even lower in 2008. The problem our nation is facing is not just limited to California, Texas, Detroit or any other horror story real estate market you read about, it’s everywhere. The impacts of Subprime mortgages is going to continue to impact the entire real estate and homebuilding sector, it’s not going away. Foreclosure signs are all over the Country and I’m wondering how a company like ZipRealty can realistically survive in the coming months without watching its shares reach a new 52-week low every month? It’s just not rational?
Fancy web 2.0 or whatever they are calling it these day businesses cashing in on the real estate game have been handed a pink slip by the U.S. economy. ZipRealty, got their pink slip a few months back, so how long on the job do you really think they have left?