KeyBanc maintains Zillow stock Overweight amid NAR policy

On Wednesday, KeyBanc Capital Markets maintained a positive stance on Zillow Group (NASDAQ:ZG) shares, with analyst Sergio Segura reiterating an Overweight rating and a price target of $85.00. Trading at $72.22, Zillow appears overvalued according to InvestingPro analysis, though the stock has demonstrated strong momentum with a nearly 50% return over the past year. The affirmation came in light of recent developments involving the National Association of Realtors’ (NAR) Clear Cooperation Policy (CCP).

Segura’s comments highlighted that the NAR’s decision to update its CCP, including the introduction of a "delayed marketing exempt listings" option, is favorable for Zillow. There had been concerns that the CCP might be revoked, which would have restricted Zillow’s access to private listings. However, with the retention and amendment of the policy, Zillow’s listing acquisition process remains intact. The company’s solid financial position, with a current ratio of 2.81 and more cash than debt on its balance sheet, provides stability during this transition period.

The analyst pointed out that while the exemption might delay the marketing of listings through Internet Data Exchange (IDX) and syndication channels, which Zillow utilizes, the company also sources listings data from multiple other outlets via Multiple Listing Services (MLSs). Segura emphasized that this diversification ensures that the availability and timing of listings on Zillow’s platform will not be adversely affected.

Segura further noted that the new policy strengthens Zillow’s competitive advantage, as the company will continue to display listings one business day after they are publicly marketed. This contrasts with other websites that depend solely on IDX and syndication and may now face challenges in providing up-to-date listings due to the MLS’s delayed marketing window.

In conclusion, KeyBanc’s analysis suggests that Zillow’s broad access to listings data through various channels shields it from the potential negative impacts of the NAR’s updated policy. This positions Zillow favorably in terms of offering accurate and current listings data, compared to competitors who might now be at a disadvantage due to reliance on fewer data sources. While currently unprofitable, InvestingPro data indicates analysts expect Zillow to turn profitable this year, with revenue growth forecast at 14%. For deeper insights into Zillow’s financial health and growth prospects, including exclusive ProTips and comprehensive analysis, explore the full Pro Research Report available on InvestingPro.

In other recent news, Zillow Group has reported strong fourth-quarter results, exceeding expectations in both revenue and EBITDA. DA Davidson responded by raising its price target for Zillow to $90, maintaining a Buy rating, while Benchmark increased its target to $110, also reaffirming a Buy rating. Despite a cautious first-quarter outlook, analysts remain optimistic about Zillow’s growth prospects, driven by strategic initiatives and partnerships, including a notable collaboration with Redfin (NASDAQ:RDFN). Piper Sandler maintained an Overweight rating with a $90 target, highlighting Zillow’s Flex (NASDAQ:FLEX) revenue growth and market share gains through its Premier Agent program. RBC Capital Markets reiterated its Outperform rating, with a price target of $88, emphasizing the potential for consistent growth through enhanced market strategies. Conversely, Bernstein SocGen Group maintained a Market Perform rating with a $65 target, noting that Zillow’s Q4 results, while surpassing forecasts, did not meet their more robust expectations. Analysts generally agree on Zillow’s conservative guidance, but they suggest potential for outperformance as the company continues to expand its Enhanced Markets and diversify revenue streams.

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