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Zillow: 2 Analysts Weigh In With 2 Widely Different Views

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Zillow: 2 Analysts Weigh In With 2 Widely Different Views

Analysts from CRT Capital and JMP Securities on Thursday weighed in on earnings and revised its price targets for the freshly named Zillow Group Inc (NYSE: Z), reflecting its merger with Trulia.

There was a significant difference between the revised price targets updated by these two firms.

z_-_merger_with_trulia_5_day_ychart.jpg

The chart above shows how price swings in Zillow shares seems to reflect a tug-of-war playing out between Zillow bulls and bears.

CRT Capital - Fairly Valued, $125 Price Target

CRT uses a different nomenclature than most investment banks. Fairly-Valued appears similar to Equal-Weight/Hold/Neutral.

CRT noted that Zillow, simultaneously with the merger, announced the elimination of 350 positions (~15 percent of total headcount), with 280 roles eliminated immediately and 70 scheduled for Q2, primarily in sales and support functions.

CRT view's Zillow's restructuring as a solid first step toward delivering $100 million in annualized cost savings by 2016. The firm revised forecasts to reflect consolidation of Zillow and Trulia, and take a slightly more conservative view on 2016 revenue given management's commentary regarding the strategic review (and potential rationalization) of Market Leader.

CRT views the combined entity's 2016 EBITDA potential remaining largely unchanged. It now forecasts $327 million of EBITDA in 2016, up from the sum of our standalone 2016E EBITDA forecasts for Zillow and Trulia of $247 million.

JMP Securities - Market Outperform, $145 Price Target

JMP reiterated its Market Outperform rating and increased its price target to $145 from $140 on Zillow.

The firm noted, "…significant revenue synergies exist as Zillow integrates its advertising platform across Trulia, including shifting Trulia to an impressions based model from share-of-voice, selling total impressions vs. mobile and desktop impressions separately, and building out Trulia's lender co-marketing program."

Cost synergies are likely to be meaningful, and Zillow has already announced a right-sizing of the company by reducing 350 positions.

JMP said conversion rates from lead to sale are improving, suggesting that ARPA (average revenue per agent) growth can continue. Second half 2014 agent net additions may have been impacted from acquisition activities.

Zillow is increasingly prepared for the pending migration away from ListHub, according to the firm, as more MLSs and brokerages establish direct connects, including two of the top three MLSs nationally.

JMP projects combined 2015 revenue of $737 million (+27 percent year-over-year), EBITDA of $149 million (20.2 percent margin) and PF EPS of $0.95.

The updated JMP price target of $145 is based on an unchanged DCF analysis with a WACC of 10 percent, a 12.0x terminal multiple, and three-year revenue and EBITDA CAGRs of 30 percent and 78.5 percent, respectively.

Latest Ratings for Z

DateFirmActionFromTo
Aug 2019MaintainsEqual-Weight
Aug 2019MaintainsOverweight
Jul 2019Initiates Coverage OnOverweight

View More Analyst Ratings for Z
View the Latest Analyst Ratings

Posted-In: CRT Capital JMP SecuritiesAnalyst Color Price Target Reiteration Analyst Ratings Trading Ideas Real Estate Best of Benzinga

 

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