Canaccord Genuity analyst Michael Graham weighed in today with a research report on Zillow Group Inc (NASDAQ:Z), reiterating a Buy rating and reducing the price target to $115 (from $125), which represents a potential upside of 25% from where the stock is currently trading.

The decreased price target comes after the company provided pro forma guidance for 2015. The outlook was negatively impacted by weakness from Trulia, which the analyst attributes to a very distracted sales force and a change in strategy at Trulia’s Market Leader division.


Graham noted, “While the core Zillow business remains strong, Trulia’s revenue will be impacted this year by ~$60M. We estimate $30M is due to Zillow discontinuing the sale of Market Leader products (see below), with the remainder due primarily to integration-related distraction from Trulia’s sales force.” Furthermore, “Our new Zillow Group estimates reflect 2015 guidance of $690M in revenue and $80-85M in EBITDA. This outlook is below our prior expectations for the combined company. For 2016, we model acceleration to 29% revenue growth and margin expansion to ~20%.”

Bottom line, “We believe 2016 is looking much stronger, with $100M in merger synergies kicking in and the potential for ad pricing expansion. We continue to believe Zillow is early in capitalizing on the real estate opportunity. While competitors do exist, we believe Zillow is operating from a position of strength.”

According to, which measures analysts’ and bloggers’ success rate based on how their calls perform, analyst Michael Graham has a total average return of 18.9% and a 63.8% success rate. Graham has a 39.7% average return when recommending Z, and is ranked #99 out of 3574 analysts.