Analysts Weigh In Following Zillow Group Inc (Z) Q2 Earnings


Zillow Group Inc (NASDAQ: Z), an online real estate database company, released its Q2 fiscal 2015 earnings on August 4. The company’s total revenue came in at $171.3 million, marking a 20% year-over-year increase on a pro forma basis. Additionally, Zillow’s real estate revenue jumped 37% year-over-year with an adjusted EBITDA of $21.0 million.

Zillow CEO Spencer Rascoff said the company “had a strong second quarter.” Rascoff also noted that Zillow’s recent acquisition of its largest competitor, Trulia, “has required a great deal of time, attention and energy.” However, Rascoff emphasized the smooth consolidation of the two companies by noting they will have “successfully combined all advertising products by the end of the third quarter, well ahead of the timetable [Zillow] shared on [its] May 12th conference call.”

Putting to rest skeptics of the buyout, Rascoff stated, “The strategic rationale for the combination remains extremely strong, as [Zillow is] already realizing benefits of [its] combined audience scale.”

Mark Mahaney of RBC Capital last rated Zillow on August 5, reiterating a Sector Perform rating on the stock and lowering his price target from $103 to $92. Mahaney echoed the sentiments of Rascoff that Zillow will continue working through the challenges of integrating Trulia into the company.

Mahaney added that he “still believe[s] that [Zillow] can again become an attractive investment vehicle [as the company] also has a dominant competitive position, [creating] the potential for major new revenue streams.” However, while Mahaney noted Zillow’s attractive business model and its effective management team, he cautioned that the company still has work to do in “[r]ecovering fundamentals – i.e. a reacceleration in revenue growth, possible in ’16,” prior to an increase in his rating.

Mark Mahaney has a 67% overall success rate recommending stocks and a +24.2% average return per recommendation when measured over a one-year horizon and no benchmark.

Jason Helfstein of Oppenheimer last rated Zillow on August 5, reiterating a Perform rating on the stock. Helfstein stated, “While Zillow remains the clear leader in US online real estate based on its overwhelming traffic statics,” the analyst remains “uncertain on long-term margins, given the integration of Trulia agents onto Zillow’s pricing model, and increased competition from NewsCorp’s realtor.com.”

Furthermore, Helfstein noted, “On its call, Z acknowledged that 2H presents the highest amount of uncertainty in its history, with respect to agent migration, while SCOR data shows realtor.com is gaining share.”

Jason Helfstein has a 52% overall success rate recommending stocks and an 11.3% average return per recommendation when measured over a one-year horizon and no benchmark.

On the other hand, Dean Prissman of Morgan Stanley last rated Zillow on August 5, reiterating an Overweight rating with a $108 price target. Expounding upon his rating, Prissman explained, “While challenges with Premier Agent revenue growth at Trulia persisted in advance of a completed integration, overall Premier Agent revenue growth was driven by brand Zillow which grew 48% y/y […] highlight[ing] ongoing strength in the core business, an area of investor concern.”

In addition, Prissman applauded Zillow for its strong revenue intake amid an environment of “uncertainty arising from challenges with Trulia, and former CFO Chad Cohen’s resignation in early July.”

Dean Prissman has a 50% overall success rate recommending stocks and a +1.3% average return per recommendation when measured over a one-year horizon and no benchmark.

Out of 10 analysts polled by TipRanks, 4 analysts are bullish on Zillow, 4 are neutral, and 2 are bearish. The average 12-month price target for Zillow is $97.63, marking a 34.81% potential upside from where the stock is currently trading. On average, the all-analyst consensus for Zillow is Hold.

Zillow consensus