Zillow's Real Estate Positioning 'Incredibly Strong': Needham

Needham's channel checks increase the confidence in the opportunities for Zillow Group Inc’s (NASDAQ: ZG) Flex program to boost the company's all-important monthly recurring revenue metric, an analyst said Wednesday.

The Zillow Analyst: Brad Erickson maintained a Buy rating on Zillow with a $110 price target. 

The Zillow Thesis: The company seems to be prepping the Flex program for real estate agents for the market in Sacramento, California, Erickson said in a Wednesday note.

Zillow may be undertaking such preparatory activities in several other markets across the U.S. for a rollout over many quarters or years in some cases, the analyst said. 

Zillow could be actively equipping a few “very large outfitted agencies” with Flex so the program can be leveraged to increase monetization and add to its monthly recurring revenue, he said. 

The general momentum of home transactions and Zillow’s ability to generate leads for such buyers remains “incredibly strong,” Erickson said, adding that this massive gain in buyer share leaves realtors with few alternatives.

Realtor feedback suggests that Zillow has gained share at the cost of other lead generation sites, the analyst said. 

Zillow’s value to its realtor customers has increased significantly, and the company will continue to benefit in the wake of the coronavirus pandemic, he said. 

“We believe Z controls its own destiny fundamentally right now, giving the company extra profit optionality to invest in all areas that can drive growth and warrant further upside in the shares.” 

ZG Price Action: Class A Zillow shares were trading 0.79% higher at $88.96 at last check Wednesday. 

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Photo courtesy of Zillow.