Zillow Still 'Equal Weight' At Barclays

In a report published Wednesday, Barclays analysts maintained an Equal-Weight rating on Zillow Group Inc Z, while reducing the price target from $95 to $90. Zillow reported its 1Q results broadly in-line with expectations, since the company had already provided pro forma 2015 guidance in April. The company's revenue and EBITDA were marginally above the estimates. The organic trends of the business are difficult to understand, since the company did not provide historical pro forma operating metrics for agents or ARPA. Zillow guided to pro forma revenue growth of about 18 percent y/y for 2Q, decelerating from 35 percent y/y growth in 1Q. This slowdown is mainly on account of changes in expectations for Market Leader and display. "We expect revenue growth will decelerate into the mid-teens in the back half before reaccelerating to 26% in 2016, although we believe an elevated level of marketing spend may be required to achieve that growth," the report explained. The analysts expect the majority of growth to come from ARPA, with a mix shift toward higher spending agents and increased pricing power post-merger. Against the backdrop of slowing traffic growth, there could be lower-than-expected operating leverage in the sales & marketing line on account of higher marketing spend. The EPS estimates for 2015 and 2016 have been reduced from -$0.02 to -$0.23 and from $1.94 to $1.39, respectively.