Zillow Could Have Traffic Issues, Oppenheimer Says

In a report published Tuesday, Oppenheimer analyst Jason Helfstein maintained a Perform rating on

. Zillow operates leading online real estate and home-related information marketplaces that help consumers find information on homes, and connect with local real estate professionals. Deceleration in traffic trends indicates that Street estimates for the company's 2016 revenues could be highly aggressive. Zillow may need to increase its marketing spend which would restrict its margins. "Per comScore, 2Q minutes are trending +3% y/y vs. +5% in 1Q and +30% in 4Q. To combat lower traffic, mgmt will likely need to increase advertising, or test new products, at the expense of margin," analyst Jason Helfstein mentioned. In the report Oppenheimer noted, "We believe a time-based model more accurately reflects how Zillow will bill revenue, vs. the legacy agents count and ARPA KPIs." Based on QTD comScore data, the mid-point of the company's 2Q guidance implies revenue per hour will decrease 9 percent sequentially versus 30 percent growth y/y in 1Q, to 10 percent in 2Q. "Given the traffic growth, and shift to impression-based pricing, we believe this is too conservative, and see meaningful upside to management guidance if June traffic is in line with April and May," Helfstein added.