In a research report issued today, RBC Capital analyst Mark Mahaney reiterated a Buy rating on Zillow Inc (NASDAQ:Z) and raised the price target to $135 (from $115), as the company completed its acquisition of Trulia on February 17, following the FTC’s approval on Febraury 13.
Mahaney commented: “Z shares were up ~10% following the call, as this acquisition remains a clear positive for Z. We didn’t hear much new on the call, so we interpret the move as short-covering. Management highlighted on the call that the key priority for 2015 will be the successful integration of Trulia. We view current valuation as reasonable, tho not compelling. And we would view integration risks associated with TRLA to be significant, given the relative size of the assets acquired. Hence, the Sector Perform rating.”
The analyst continued, “Long term, we believe that Z could potentially again become an attractive investment vehicle. Z faces a very large TAM ($13B+ in real estate-related advertising), clear secular shifts as consumers and real estate professionals turn to ‘Net channels, has the leading competitive position within the sector, the potential for material new revenue streams (Mortgages, Rentals, Home Improvement/Design, International…), an attractive business model (90% Gross Margins, perhaps 40% l-t EBITDA Margins), and a highly effective management team.”
According to TipRanks.com, which measures analysts’ and bloggers’ success rate based on how their calls perform, analyst Mark Mahaney has a total average return of 23.0% and a 67.9% success rate. Mahaney has a 30.0% average return when recommending Z, and is ranked #13 out of 3476 analysts.