SunTrust Robinson Humphrey on Zillow's Second Quarter Results

Zillow (NYSE: Z) reported its second quarter results on Tuesday after market close. The real estate and home-related information marketplace company saw its quarterly revenue expand by at least 65 percent for the 15th straight quarter.In a note to clients on Wednesday, Robert Peck of SunTrust Robinson Humphrey maintained a Neutral rating on shares of Zillow with a price target raised to $125 from a previous $110.The analyst points out that agent revenue grew 82 percent in the quarter versus a 76 percent growth in the first quarter and a 68 percent growth in the fourth quarter while average revenue per user increased 20 percent year over year after only rising ten percent in the previous quarter.Bookings surged 101 percent in the quarter as the company was able to expand its available inventory to meet increased agent demand while pricing stayed flat. Same Agent Sales rose 62 percent from a year ago due to what Peck describes as being “driven by higher impressions not pricing.”User growth remains strong, according to Peck who notes that user growth decelerated at 49 percent after growing 51 percent in the previous quarter, reaching approximately 89 million users in July. Peck notes that investors should pay attention to mortgage revenues in the coming quarters. “While macro headwinds remain, we expect new products like pre-approval and relationships with national lenders like Bank of America and Citi to have a positive impact going forward.”Peck also warns investors that while agent growth remained strong in the quarter at 46 percent year over year growth, it is lower than the 56 percent growth and 64 percent growth the company realized in the prior two quarters.“We appreciate management's focus on top performing agents, which drove the lions share of the average revenue per agent expansion – they drive more consistent and efficient revenue to the platform, but also monitor the total expected agent total addressable market going forward,” Peck cautioned.Finally, Peck maintains a belief that Zillow's merger with Trulia (NYSE: TRLA) is still expected to close in 2015.