Zillow's Market 'Several Times Larger' Than Investors Expect, KeyBanc Says In Bullish Initiation

Given its high traffic volumes, capital and data, Zillow Group Inc Z enjoys significant competitive advantages and is well-positioned to become the leading market maker for residential real estate in the U.S., according to KeyBanc Capital Markets.

The Analyst

Andy Hargreaves initiated coverage of Zillow Group with an Overweight rating and $66 price target.

The Thesis

Zillow's high traffic volume not only constitutes a key advantage, but also creates downside protection for the company, Hargreaves said in a Thursday initiation note. (See his track record here.) 

Zillow’s traffic also creates opportunities for the company to “move closer to the transaction and extend into ancillary markets,” the analyst said. 

Zillow could reaccelerate its core revenue growth with ongoing improvements its lead management tools and its strong position to capitalize on new opportunities in homes, rentals, mortgages and titles, he said. 

KeyBanc views Zillow as a market maker in iBuying in the U.S. and believes demand in this space could surpass expectations, with the market growing to become “several times larger than what most investors appear to anticipate.”

The managed marketplace for residential real estate is still in a nascent stage and has the potential for “years of solid growth,” Hargreaves said, adding that Zillow should be able to generate steady revenue growth and substantial profit growth during this period. 

Price Action

Zillow shares were down 1.12% at $47.48 at the time of publication Friday. 

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Photo courtesy of Zillow.