Canaccord Genuity Analyst: Trulia Sales Force Getting Distracted By Zillow-Trulia Merger Process Led To Business Disruption

Shares of Zillow Group Inc Z plummeted more than 12 percent during early trade on Tuesday, but made a recovery during the rest of the trading day to close the day down 1.38 percent from previous close.

The reason for the slump was disappointing outlook for 2015 provided by the company in a operational update call. Zillow CEO Spencer Rascoff cited "the protracted FTC approval process" during the acquisition of Trulia as the explanation for the weak guidance.

Michael Graham, Canaccord Genuity was on CNBC recently to explain what he thinks was the real reason behind the disappointing 2015 outlook provided by Zillow’s management.

Employees Got Distracted

“I think that what happened with the merger closing is that the Trulia sales force got pretty distracted by the merger process that led to some business disruption,” Graham said. “One of the major reasons for that was because the merger took a good bit longer to close than we originally thought.”

He continued, “That could have been for a variety of reasons, one of those I think was the FTC process. So, it makes sense in the narrative of sort of what’s going on with Zillow and I think that what you are seeing in the stock today is investors are sort of comfortable with the notion that this is sort of one step backwards and two steps forward in the future.”

“Seems like the Zillow business is on a really strong footing and truly the employees got a little bit distracted heading into the close of the merger and the integration.”