Zillow Can't Flip, Peleton Pedals Down

Nov 07, 2021 | How should swing traders use events to trade?

Weekly Newsletter- Week of 11.07.2021  

Turns out Flipping Houses is Harder than it Looks 

Shares of Zillow, the digital real estate company, plummeted this week after reporting earnings. Zillow reported an unexpected loss of $330M thanks to its failed house flipping division within the company. This division has been so unsuccessful, they expect total quarterly losses to inflate all the way to $500M, just for this quarter. Zillow has announced they will be shuttering the entire division that is responsible for buying houses and reselling them for profit. Zillow shares are down over 35% just this week. 

Losses Pile-Up 

Zillow informed its shareholders they would be shutting down their home buying business after noting it was causing too much volatility on their balance sheet. As the pandemic began, Zillow decided to start buying up as many houses as it could. With real estate prices at record highs and the work from anywhere economy that was fueling moves out of high rent cities, Zillow thought they found a huge opportunity for growth. Unfortunately for Zillow, their investments did not pay off! We’ve reported extensively on the red-hot housing market, the rise in home prices, and the overall lack of available homes. Despite these catalysts, Zillow’s decision to buy up home after home in hopes of establishing a surplus of housing inventory has been a huge failure for the company. 

As the losses continue to widen, Zillow has been forced to sell off its inventory of homes. With many of those houses being sold at a much lower price than they were acquired for. Zillow made the gamble to stockpile houses in this economy and it has not paid off. Zillow bet big and they are now are trying to unload over $2.7B worth of homes. We’ve been in the middle of an unprecedented real estate market for the last two years, and the volatility and uncertainty seem likely to stay for the foreseeable. 

Weekly Swing Trades

PNRG (Prime Energy)

October 2, 2022

Entry Price:

80.62

Stop Price:

76.85

Target Price:

88.04

Time Frame:

1 Week Hold

Expecting a short-term bump after a recent OPEC+ announcement regarding the a supply constraint to oil. The constraint would result in ~1M less barrels of oil per day, which should cause a price jump. Low RSI and bouncing off our 250 day moving average, both hallmarks of a good swing trade.

DV (Doubleverify)

October 2, 2022

Entry Price:

27.75

Stop Price:

26.75

Target Price:

29.00

Time Frame:

3 Week Hold

Using our moving averages heavily on this swing trade, look for continued strength as we try to notch out a 6-8% gain. Specifically, we are taking advantage of of a recent cross over in the 50 day moving average. Last week closed down, so wait for confirmation of a reversal.

Peloton Crashes 

Peloton is another high-flying pandemic winning stock that is down big off its 52-week highs. This week, the former Wall Street darling reported earnings which sent the stock crashing and burning down lower. Peloton was a massive winner during the pandemic, but it has struggled to regain traction as at-home restrictions have lessened. Not to mention, supply chain issues continue to impact Peloton's bottom-line when it comes to delivery. The stock dropped 35% on Friday alone, after reporting disappointing earnings Thursday. The stock is down over 40% this week and nearly 60% from its all time highs previously set in 2020. Shares have tumbled all the way down to $55 each, after skyrocketing to $170 a share during the height of the pandemic. 

PTON Earnings

Higher than expected losses were just one of the many issues with Peloton's stock. Peloton noted overall interest and demand for their products continue to tick lower. This is being driven by the desire for more people to work out in a gym, and not in their own homes. Looking ahead, Peloton also lowered revenue expectations and guidance for the remainder of the year. Slowing growth, demand uncertainty, and revenue downgrades are a surefire way to trigger a massive selloff. And selloff the stock has done. While this may be still a very real long-term winner, the immediate future of Peloton's stock remains incredibly uncertain. Once one of the hottest stocks on the market, Wall Street has quickly soured on the at-home workout provider. 

Pinterest TV

This week Pinterest announced a new line of business entitled "Pinterest TV", as the company looks to expand its services. Pinterest is looking to grow its core operations beyond being an application for inspiration. Pinterest TV will feature a series of live and original programming. These new shows will focus on home, fashion, food, DIY, and much more. Shows will begin streaming live on November 8th, while an on-demand option will also be available. This highlights yet another example of Pinterest attempting to pivot its model to help generate more growth. PINS has been battling other social media apps like TikTok, IG, and YouTube, and it's becoming clear they are failing to attract time, attention, and dollars of Gen-Z users from those other apps. Growth is slowing and PINS is worried they will be viewed in the same light as some of the older, more legacy social media apps such as Facebook (who also recently pivoted their business ops. We covered the Metaverse extensively in last week’s newsletter) Pinterest has vowed to make video streaming a core competency going forward and a bigger part of their daily operations. PINS also recently introduced "Watch" a clear TikTok rip-off hoping to increase active daily usage. Pinterest will be investing over $20M into this new venue. Pinterest is down 27% for the year and the company is looking for ways to get back into growth mode. 

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Weekly Watchlists

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Weekly Review

Market Performance- Week of 09.25.2022

Recent Winners

SBUX (Starbucks)

SBUX (Starbucks)

Entry Price:

85.00

September 11, 2022

Price at High:

89.90

Return for Members:

5.76%

Timeline:

2 Month Hold

Strong momentum over the last few weeks. Watch for a mean reversion, but if moving averages stay consistent look for an early play to open the week.

PNRG (Prime Energy Resources)

PNRG (Prime Energy Resources)

Entry Price:

83.20

September 4, 2022

Price at High:

100.00

Return for Members:

20.19%

Timeline:

3 Week Hold

PNRG had a drawdown to historical levels of support (around the 100 day moving average). Looking to make an entry in the coming days as we also have macro tailwinds with the energy crisis in Europe.

PYPL (Paypal)

PYPL (Paypal)

Entry Price:

87.00

August 28, 2022

Price at High:

103.00

Return for Members:

18.39%

Timeline:

4 Week Hold

Playing off the dip in June, we're starting to see momentum as the 50MA is crossing over the long-term averages. Look to for momentum to continue and an early entry on Monday.

Recent Watchlist Winners

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