Zillow (NASDAQ:Z) provides real estate and home-related information on the Internet and through a mobile app. The company is the largest in this field and recently completed the acquisition of the second largest such company, Trulia, in February. Although the stock price peaked the day after the acquisition was completed, it has fallen over 25% since then.

The fall in the stock price is unwarranted, though. The acquisition of Trulia undoubtedly had its troubles, as the deal ended up taking longer than expected to get approval from the Federal Trade Commission. Information from the latest earnings report and a conference call that took place a month earlier presented strong evidence that the acquisition is coming along, and the stock price is set to bounce back before the end of the year.

Trulia Being Integrated Into Business

The most important thing to take away from the two calls that took place in April and May is the progress of integrating Trulia into Zillow’s overall business. As the two most-popular real-estate websites currently operating, they were supposed to not have too many difficulties integrating because of their similarities. This proved to be untrue, as CEO Spencer Rascoff revealed that it had to reduce Trulia’s reliance on banner advertisements to improve the site over the long-term.

Run as a separate website using the same information as Zillow, Rascoff revealed that this would hurt revenue in the short-term, but would drive growth for the company and improve the overall product the company offers. During that meeting, Rascoff admitted that 2015 would be a transition year for the company as it worked to integrate the new acquisition into the larger company. But he also mentioned that the integration was coming along faster than he had been expecting it to.

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Source: NYPost.com

The positive overall outlook about integrating Trulia into the company continued during the earnings call in May, when Rascoff mentioned that doing so was the company’s biggest priority. Zillow will have fully integrated the new business by the end of the year, setting up the company to progress well until it enjoys an extremely strong 2016 and beyond. At that time, real-estate agents will be able to buy advertising from the combined company and manage its listings across all four of the company’s brands, which also include StreetEasy and HotPads in addition to Zillow and Trulia.

Increased Scale In Growing Market

Making the integration of Trulia the top priority makes sense considering the scope and scale that the overall business will have in the online real estate market. Once Zillow’s product ecosystem is fully integrated, the company will become much more attractive to real estate professionals, as advertising on the two biggest online real estate markets will be easy and can be done at the same place.

In order to make sure that real estate agents want to advertise on their products, Zillow will need to make sure that it continues to increase its audience, another priority of the company. During the first quarter, the company’s four brands had 140 million unique visitors, with a good deal of that number coming from mobile apps. These numbers will continue to grow as real estate agents continue to put their listings on Zillow’s websites.

The listings will also now be exclusively straight from real estate agents, as it is no longer taking MLS listings, which stands for Multiple Listing Service, from ListHub, as its contract expired. In order to make up for the loss of listings from this service, Zillow has signed up hundreds of new MLS partners since the beginning of the year. The increased scale and leadership of the online real estate market will give the company the ability to continue making such partnerships.

Conclusion

The recent fall of Zillow’s stock price is understandable, but the company is now undervalued. With a strong market position in a field that will grow rapidly in the next few years, this growth stock provides great upside potential to investors. When Trulia is fully integrated into the company, it will be the indisputable place to go for real estate solutions on the Internet. Add in continued growth in mobile, as well as its ability to add more MLS listings in the future, and the company’s stock is set to skyrocket next year with solid returns until then. At this price level, the I Know First algorithm is bullish on Zillow.