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Wall Street Analysts Can't Agree On Zillow

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Wall Street Analysts Can't Agree On Zillow
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Zillow Group Inc (NASDAQ: Z) reported its second-quarter results after Tuesday's market close. The company reported a loss of $0.46 per share (non-GAAP loss of $0.01) on revenue of $171.3 million, while the Street was looking for a loss of $0.27 per share on sales of $169.17 million.

After opening above $81, shares traded recently at $74.07.

Here is a summary of what Wall Street's top analysts are saying after the print.

Morgan Stanley: ‘Strong' Top And Bottom Line

Dean Prissman of Morgan Stanley commented in a note that Zillow reported "solid" results with "robust" growth at brand Zillow.

Prissman noted the company reported an adjusted EBITDA of $21 million, $16 million above the high-end of its guidance. In addition, the bottom line beat was driven by marketing efficiencies and better-than-expected synergies.

Prissman continued that Zillow's "most strategic" revenue stream, Real Estate Revenue (largely made up of the Premier Agent business) grew a "solid" 37 percent on a proforma basis. Overall Premier Agent revenue growth was driven by the Zillow brand and grew 48 percent year-over-year.

Related Link: Morgan Stanley Thinks Zillow Will Still Outperform As Company Survives 'Complicated Challenges'

Bottom line, the growth seen in Premier Agent highlights the "ongoing strength" in the core business and should ease investor concerns moving forward.

Shares remain Overweight rated with an unchanged $108 price target.

Macquarie: Integration Risks ‘Dissipating' But Still Exists

Tom White of Macquarie Research commented in a note that Zillow's integration of Trulia is "ahead of schedule" and Zillow's leadership position in metrics including audience size and data/listings appear to be "as solid as ever."

On the other hand, White noted that near-term visibility surrounding the migration of Trulia's paid agent advertiser product remains "limited" as management's commentary "sounds as though it's been conservative in terms of forecasted impact."

As such, the analyst stated he continues to "have questions" around the true total addressable market for Zillow's core agent ad business, leading to concerns that the potential for toughening ARPA (average revenue per agent) comps will "weigh on growth."

Shares remain Neutral rated with an unchanged $100 price target.

Deutsche Bank: ‘More Uncertain Than Ever'

Lloyd Walmsley of Deutsche Bank commented in a note that Zillow's business is "changing for the negative" as subscriber and traffic growth slowed down while the company is increasingly focused on "super-agents."

Walmsley said Zillow's reliance on super-agents "changes the story from a simple share shift story, to one more dependent on ‘king making' agents." He added that "the product is not for everyone" but focused on a subset of agents. As such, growth will depend increasingly on this niche becoming more efficient - a "much more difficult" road ahead.

Finally, Walmsley noted that Zillow's early outlook into 2016 "looks substantially low" when compared to consensus estimates and is "hopefully conservative."

Shares were maintained at Hold rated with a price target lowered to $71 from a previous $96.

Pacific Crest: Trulia Integration To Get ‘Even More Interesting' In Q3

Evan Wilson of Pacific Crest commented in a note that Zillow isn't focused on agent additions, even though this is a key metric for determining its successes in the third quarter when the company combines with the Trulia ad platform.

Wilson added that Zillow's salesforce is now tasked with contacting all 100,000-plus subscribers to explain and sell the combined Zillow group and distribution across its entire platform. As such, the company "has its work cut out" because of the "perceived differences" between the Zillow and Trulia user bases.

Wilson also noted that Zillow's acquisition of Trulia has "been messy" and "significant questions persist." As such, investors may find it beneficial to wait on the sidelines and wait to see the final outcome of the combination of the two companies.

Shares remain Sector Weight rated with no assigned price target.

Latest Ratings for Z

DateFirmActionFromTo
Jul 2016Morgan StanleyMaintainsOverweight
May 2016Cowen & Co.UpgradesUnderperformMarket Perform
May 2016BenchmarkMaintainsBuy

View More Analyst Ratings for Z
View the Latest Analyst Ratings

Posted-In: Barclays Dean Prissman Deutsche Bank Evan WilsonAnalyst Color Long Ideas Analyst Ratings Trading Ideas Best of Benzinga

 

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