Zillow’s (Z) stock fell more than 6% Tuesday after a stock research firm questioned the website’s “underlying business metrics.”

Citron Research released what may be one of the most scathing reports on Zillow, writing “a torrent of insider trading” probably suggests something is amiss. 

Citron wrote:  “It generates virtually all of its revenue from U.S. real estate agents. And it does so the old-fashioned way—by cold-calling them on the telephone.”

Chad Bartley, a senior research analyst with Pacific Crest Securities, said he agrees with parts of the report, but not all.

While Bartley admits there’s a lack of disclosure around Zillow’s subscriber churn and page view/unique visitor growth is waning somewhat, insiders selling stock is not that unusual, he claims. Bartley also believes Zillow has more room to grow its market share among real estate agents.

Right now, there are 1.8 million real estate agents listed in the U.S. and only 400,000 have created a Zillow profile. Another 22,000 are actual Zillow subscribers, so Bartley sees an untapped market left for Zillow to target.

“Unique users were growing at high levels and now there is a deceleration,” Bartley pointed out. “But, you are still seeing good growth. I still think Zillow is the market leader.”

Zillow declined to comment, but the real estate website has been active this year in promoting new initiatives like its expanded partnership with Yahoo! for rental listings.

Zillow first went public last year, with shares doubling after its initial launch. The company came out of the gate with an initial public offering of 3.46 million shares of common stock at $20 per share.  Yet, Citron claims “Yahoo/Zillow hasn’t moved the needle since April 2011, regardless of all that IPO money.”

In the second quarter, Zillow’s income shrunk 19% to $1.3 million, or 5 cents a share, after reporting a profit of $1.6 million, or 0 cents a share, last year.  Revenue, on the other hand, jumped 75% from $15.8 million in 2Q of 2011 to $27.8 million in the same quarter of 2012. 


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