Zillow Group (Z  ) delivered first-quarter earnings that topped Wall Street's expectations on the top and bottom-line. However, shares remain down by nearly 40% from their high a couple of months ago. The pandemic led to a surge in visitors on Zillow as it caused a surge in demand amid a tight housing supply.

Inside the Numbers

In the first quarter, Zillow earned $0.44 per share in Non-GAAP earnings which were well above consensus expectations of $0.25 per share. It was also a marked improvement from last year when the company lost $0.04 per share in Q1. Revenue came in at $1.2 billion, an 8% increase from last year and above expectations of $1.1 billion.

Looking at Zillow by segment shows strong performance across the board. The Homes segment, which includes the Zillow Offers iBuyer business, had revenue of $704.1 million, a decrease of 9% from last year but above expectations of between $595 million and $620 million.

Internet, media, and technology revenue was up 35% to $446.3 million and above expectations of $415 million to $428 million. In mortgages, the company had revenue of $68 million above expectations of $59 million to $64 million.

The company has become the dominant online destination for real estate information, especially among younger buyers. Traffic to its app and website reached 221 million monthly active users, up 15% from last year with 2.5 billion visits in total.

In Q2, Zillow expects revenue between $1.2 billion and $1.3 billion, slightly below expectations of $1.3 billion, and adjust EBITDA between $116 million and $140 million.

Stock Price Outlook

Despite the stock's recent correction, Zillow remains overvalued by many metrics. It has a price to sales ratio of 6.3 and a PE ratio above 80.

However, the stock's true promise is that it will be able to modernize and take a chunk of the real estate services market which total $1 trillion and is full of various inefficiencies that are seemingly ripe for tech disruption. The company's end goal is to handle real estate transactions from listing to closing.

It's only a matter of time before some company succeeds in accomplishing this. And, Zillow has a great chance given its early lead in terms of market share and growing traction. The recent bull market in housing is also another potential catalyst.

Therefore, the best approach for investors is to stay constructive on the stock but remain patient in terms of finding the best entry point.