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On Wednesday, Keefe, Bruyette & Woods adjusted their price target on Zillow (NASDAQ:Z) shares to $76 from the previous $80, while maintaining a Market Perform rating for the company. The decision follows a report that the Federal Trade Commission (FTC) is investigating Zillow’s recent partnership with Redfin (NASDAQ:RDFN)’s rentals business. The inquiry is examining whether the collaboration could be considered a merger with potential anti-competitive effects, a concern that stems from information published by The Capitol Forum last Friday. Despite regulatory concerns, InvestingPro analysis shows Zillow maintains strong financial health with a current ratio of 2.81, indicating robust liquidity to meet short-term obligations.
The partnership under scrutiny was initially announced in February, and its potential implications are now being evaluated by the FTC. In light of this development, Keefe, Bruyette & Woods analyst Ryan Tomasello expressed a cautious stance ahead of Zillow’s first-quarter earnings report. The analyst anticipates that the consensus estimates for Residential revenue growth for the remainder of the year might be overly optimistic.
In addition to concerns surrounding the FTC investigation, the revised price target also takes into account a modest reduction in Zillow’s 2025 estimates. This adjustment is attributed to slower housing market data that could impact the company’s performance.
Zillow is expected to release its first-quarter financial results soon, and the market will be watching closely to see how the company’s performance aligns with the analyst’s projections and the ongoing investigation’s implications. Keefe, Bruyette & Woods have set their expectations with a degree of caution as the real estate market faces regulatory scrutiny and economic headwinds.
In other recent news, Zillow Group (NASDAQ:ZG) has been the focus of several analyst updates and earnings reports. Zillow’s fourth-quarter earnings report exceeded expectations, though the company issued a weaker-than-anticipated forecast for the first quarter, reflecting a slowdown in the housing market. Evercore ISI responded by raising its price target for Zillow to $90, maintaining an Outperform rating, while expressing optimism about the company’s innovative product cycles and cost strategies. Meanwhile, Bernstein kept a Market Perform rating on Zillow, with a price target of $65, anticipating a strong fourth-quarter performance driven by increased home sales transactions and revenue.
William Blair also initiated coverage on Zillow with a Market Perform rating, highlighting the company’s dominant traffic share and potential gains from a housing market rebound. However, William Blair noted challenges such as intensifying competition and potential industry changes that could impact Zillow’s financial stability. Zillow’s efforts to diversify revenue streams and develop a comprehensive digital platform may face hurdles due to the complexity of integrating third-party providers. Additionally, the company is contending with competition from CoStar’s Homes.com and potential impacts from industry lawsuits affecting revenue from buyer-side agent commissions.
Zillow’s recent developments include positive outcomes from its Enhanced Market efforts, accounting for 21% of total connections, expected to rise to 35% by 2025. The company’s Rentals segment is also experiencing robust growth, supported by a multifamily advertising campaign and a partnership with Realtor.com. Despite the challenges, analyst firms like Evercore ISI and Bernstein remain cautiously optimistic about Zillow’s future prospects.
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