Barclays Upgrades Zillow As Move Trial Is Settled

Barclays' Christopher Merwin upgraded Zillow Group, Inc.-Class A ZG from Underweight to Equal Weight with a price target of $32.00 from $20.00. The rating change came after Zillow announced it settled its lawsuit with Move (News Corp NWSA) for $130 million Monday.

"$130 million [is] a surprisingly small sum in the context of the $2 billion in damages Move was originally seeking," Merwin said. The analyst expected a settlement of at least $500 million, viewing the $130 million penalty as "highly favorable" for Zillow.

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Additionally, the analyst appreciated Zillow's announcement to introduce a self-serve advertising product that could account for significant reduced expenses. "We believe [the initiative] could eventually create significant savings in sales expense, which accounts for an estimated ~29 percent of sales in 2016E," said the analyst.

To reflect trial results, Barclays raised 2016 EBITDA estimates to $133 million from $116 million while increasing the target multiple given a new long-term opportunity from self-serve adds.