What History Says About Buying a Dip in Zillow Stock
The real estate platform is growing in a flat market, but its stock is falling, here’s what the data says about bargain-hunting.
Zillow (ZG) is putting up impressive numbers, growing revenue 18% in the first quarter while the broader housing market was, in the company’s own words, “essentially flat.” Yet the stock has pulled back, dropping about 17% in just the past few weeks. This is the kind of disconnect that gets an investor’s attention. You see a company out-executing its environment, but the market is selling. So, is this a chance to buy a quality name at a discount, or is it a trap?
The answer isn’t simple, and it starts with a look at the company’s own history. A dip isn’t automatically a bargain, and for Zillow, the past offers a serious note of caution for anyone looking to jump in now.
What History Says About Buying Zillow Dips
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When a stock like Zillow falls hard and fast, the first question is whether history rewards buyers for their courage. In this case, the record is not encouraging. The company’s stock has seen a sharp drop of 20% or more in a single month on 26 separate occasions since 2010. Of those 26 instances, only 12 resulted in a positive return over the following year. The median return twelve months after such a dip was a painful negative 13%. Perhaps more importantly, buyers who stepped in typically had to endure more downside first, with the median worst further drawdown hitting 36% before any recovery took hold. The historical data suggests that buying a steep decline in Zillow has often been a premature move, leading to more losses before gains.
- 37% median peak return within 1 year of dip event
- 178 days is the median time to peak return after a dip event
- -36% median max drawdown within 1 year of dip event
| Period | Past Median Return |
|---|---|
| 1M | -0.8% |
| 3M | -10.4% |
| 6M | -13.7% |
| 12M | -12.7% |
| 30 Day Dip | ZG Subsequent Performance | |||||||
|---|---|---|---|---|---|---|---|---|
| Date | ZG | SPY | 1Y | Peak Return |
Max Drop |
# Days to Peak |
||
| Median | -13% | 37% | -36% | 178 | ||||
| 6012026 | -22% | 7% | -12% | 0% | -12% | 1 | ||
| 2052026 | -21% | -1% | -40% | 1% | -40% | 1 | ||
| 10292025 | -21% | 5% | -53% | 7% | -53% | 35 | ||
| 4082025 | -20% | -16% | -31% | 45% | -32% | 162 | ||
| 4152024 | -24% | -1% | 45% | 101% | -9% | 301 | ||
| 10182023 | -22% | -3% | 56% | 66% | -13% | 337 | ||
| 9222022 | -22% | -11% | 45% | 81% | -12% | 320 | ||
| 3302022 | -21% | 3% | -15% | 2% | -47% | 5 | ||
| 1212022 | -22% | -6% | -14% | 29% | -46% | 25 | ||
| 11032021 | -30% | 6% | -51% | 4% | -59% | 1 | ||
| 8172021 | -21% | 3% | -62% | 11% | -70% | 73 | ||
| 5182021 | -23% | 1% | -63% | 13% | -68% | 42 | ||
| 3242021 | -23% | -0% | -60% | 12% | -66% | 15 | ||
| 3122020 | -26% | -24% | 346% | 480% | -33% | 341 | ||
| 8132019 | -23% | -1% | 109% | 119% | -35% | 360 | ||
| 8132018 | -21% | 4% | -27% | 7% | -43% | 331 | ||
| 1212016 | -21% | -10% | 82% | 94% | -17% | 193 | ||
| 11202015 | -24% | 4% | 34% | 51% | -36% | 255 | ||
| 8052015 | -22% | -1% | -46% | 5% | -76% | 1 | ||
| 4012015 | -22% | -2% | -75% | 6% | -82% | 26 | ||
| 10032014 | -22% | -1% | -74% | 11% | -78% | 138 | ||
| 10232013 | -20% | 4% | 35% | 100% | -11% | 278 | ||
| 11022012 | -20% | -3% | 124% | 177% | -36% | 306 | ||
| 6202012 | -22% | -0% | 61% | 88% | -30% | 321 | ||
| 11302011 | -22% | 2% | 25% | 106% | -3% | 295 | ||
| 10112011 | -21% | -1% | 44% | 76% | -18% | 345 | ||
[2] Analysis for period from 1/1/2010 to 6/12/2026
But Buying The Dip Demands A Healthy Business
Of course, history is a guide, not a guarantee. A stock’s past performance doesn’t dictate its future, especially if the underlying business is sound. On that front, Zillow clears the bar. The business is fundamentally healthy, which complicates the bearish historical pattern. It passes every basic quality check you’d want to see. Revenue grew 16.8% over the last twelve months, and its operating cash flow margin is a healthy 17.2%. The balance sheet is strong. This isn’t a story of a broken company; it’s a story of a solid business whose stock is under pressure.
| Quality Metrics | Value | Quality Check |
|---|---|---|
| Revenue Growth (LTM) | 16.8% | Pass |
| Revenue Growth (3-Yr Avg) | 12.6% | Pass |
| Operating Cash Flow Margin (LTM) | 17.2% | Pass |
| Leverage (see below) | – | Pass |
| => Interest Coverage Ratio | 4.8 | |
| => Cash To Interest Expense Ratio | 46.1 |
Is This Dip Different From The Last Ones?
So, if the business is solid, why the sell-off, and does the historical warning still apply? The market seems to be looking past the strong headline growth and focusing on a slowdown in the company’s core. While total revenue is growing, management guided for its residential revenue growth to slow to “mid-single digits” in the second quarter. At the same time, costs are a concern, with the company flagging approximately “$20 million of incremental legal expenses” for the upcoming quarter. This combination has investors questioning whether Zillow can hit its ambitious margin expansion targets for the second half of the year.
The bull case is that Zillow’s diversification is working beautifully. The Rentals segment is booming, with revenue up 42% year-over-year in the last quarter, and its mortgage business is scaling rapidly. The company has proven it can grow even when the housing market doesn’t. The catch is the price you have to pay for that growth. Even after this dip, Zillow stock trades at a price-to-earnings ratio of about 125, a steep premium to the 24 multiple of its peer benchmark. You’re not buying a bargain in absolute terms; you’re buying a growth story at a slightly lower price.
Ultimately, deciding whether to buy this dip comes down to your conviction in one key area. The historical record for dip-buyers here is poor, and the valuation remains high. The business itself, however, is performing well. The single most important thing to watch is whether Zillow can deliver the significant EBITDA margin expansion it has promised for the back half of 2026. If it can, it will prove the current pessimism was misplaced. If it can’t, history suggests this dip could be just the beginning of the slide.
Wondering which other quality stocks have just sold off, and whether their past dips have tended to recover? You can screen the market’s recent pullbacks on our Buy The Dip rankings.
Beyond Timing A Single Dip
Buying the dip on one stock looks easy on a chart, but living through it is hard. A “bargain” that keeps falling, tests your nerve, and the temptation to sell at the bottom is exactly what derails most dip buyers. Catching the rebound takes a plan that makes staying invested a discipline rather than a test of willpower. That is the idea behind the Trefis High Quality (HQ) Portfolio, which holds 30 quality stocks, sized and rebalanced with discipline, and has a track record of outpacing the S&P 500, S&P Mid-cap, and Russell 2000. Pairing a single-name dip with a diversified core is how you keep the upside while smoothing the swings that shake investors out at the worst moment.