Zillow Analyst Roundup On Q3 Results

Zillow Inc. Z reported Q3 financial results Wednesday beating EPS estimates but guiding Q4 lower.

The stock responded by falling over 5 percent Thursday and recently traded at $98.31

Below are analyst comments on the Q3 results along with current ratings and price targets.

J.P. Morgan - Market Outperform, $140 price target
“Aside from display results, we believe Zillow reported a strong quarter as Premier Agent revenue growth of 86 percent Y/Y to $62 million accelerated for the fourth consecutive quarter on higher average revenue per agent (ARPA), which rose 32 percent Y/Y to $349 and Zillow added 4,059 new agents in the quarter. Total revenue of $88.6 million was 0.7 percent above consensus and EBITDA of $14.6 million came in 2.1 percent above consensus, while PF EPS of $0.13 compared to consensus of $0.08. Given the strength in Zillow’s core Marketplace business...we would be buyers of the stock on any material weakness.”

Barclays - Overweight, $140 price target
“There were a number of moving pieces in Z's 3Q results, but most importantly, Z came in ahead of our estimate on top line, while the 4Q revenue guide was just below our prior estimate. We believe the aftermarket weakness is mainly attributable to the lower-than-hoped 4Q guide, a theme that has played out many times so far this earnings cycle. However, we believe the most important catalyst for Z-possible anti-trust approval for the TRLA merger-is getting closer, we think sometime in 1Q. At that point, we still expect to see a re-rate in shares."

Pacific Crest - Sector Perform, no price target
“We are positive on Zillow’s growth strategies, execution and near and long-term outlook. We believe Zillow can sustain roughly 30 percent revenue growth and slightly faster earnings growth for several years. Zillow’s real estate marketplace business has achieved very high growth, but is still only scratching the surface of the opportunity—$7 billion in real estate advertising and more than 600,000 agents (the number of profiles, but not subscribers, on Zillow). The company is also just beginning to monetize rentals, which is a $3 billion to $7 billion advertising opportunity.”

Benchmark - Buy, $155 price target
"Zillow is increasing investments in engineering, advertising, a sales force expansion and rentals. We believe these investments are warranted to protect Zillow’s first mover advantage. As Zillow adds more services, the potential to cross sell among products increases and the likelihood of churn declines. In addition, rentals are a logical fit for Zillow’s consumer facing properties. Over the longterm, we believe Zillow’s margins will expand as the business scales."

SunTrust - Neutral, $115 price target
"Zillow is the market leader of an under penetrated online real estate market that is: increasing
market share, driving high revenue growth (3 year CAGR ~50 percent), expanding its competitive moat, and is estimated to double margins over the coming years. However, the company trades at a premium to its growth rate and the comp group. Our target is based on estimates factor in healthy growth rates and a positive long term analysis and outlook for the real estate industry. We feel investors have discounted a fair amount of future growth at current levels, and would wait for a pull back in the shares."

Canaccord - Buy, $125 price target
"Zillow continues to emphasize selling more impressions to veteran agents who can afford to pay the most, and this is causing growth in agents to slow considerably. That said, the PA business seems to be on very strong footing. We continue to expect the Trulia merger to close in the first half of 2015, after which we expect to see a period of sustained strength from the combined company as it optimizes the pricing of its ad units. We would not be surprised at some near-term volatility related to the slower customer growth, but still believe there is a long runway for growth."

CRT - Fair Value, $140 price target
"This was a mixed bag quarter for Z. Z reported generally strong 3Q results but guided 4Q revenue and EBITDA below CRT/Street expectations. We also expect a significant 4Q decel in Premier Agent revenue (we are forecasting +67 percent YoY vs. +86 percent YoY in 3Q), with management noting that Z pulled inventory forward in 2Q/3Q and that exceptionally strong bookings growth in 2Q did not carry through in 3Q nor into the seasonally slower 4Q. Given the guide which implies a steep decel in the core PA business and a slowdown in the Display Advertising business, we remain on the sidelines with a Fair Value rating. We are modestly lowering our 2015 EBITDA by 5 percent from $105M to 100M.”