Tuesday, UBS reiterated its Buy rating and $72.00 price target on Zillow Group (NASDAQ:ZG), maintaining a positive outlook on the company's stock. The firm's analyst highlighted that despite the stock's 23% decline since the National Association of Realtors (NAR) settlement on March 15, 2024, the current concerns might be exaggerated. According to the analyst, the settlement's impact on agent commissions, which are around 5.5%, will be minimal, measured in basis points rather than percentage points.
The analyst's commentary also pointed to the potential benefits for Zillow following the NAR settlement. There is a belief that real estate agents might increase their reliance on Zillow's tools, and those from smaller firms may feel compelled to join larger brokers such as Compass. This could, in turn, provide a growth opportunity for Zillow's market presence and product offerings.
Despite the broader online real estate sector falling out of favor following the unexpected pace of the NAR settlement and a subsequent drop in Existing Home Sales in March 2024 by 3.7% year-over-year, UBS suggests that the current market conditions present a buying opportunity. The firm emphasizes Zillow's unique product and market growth opportunities as reasons for their recommendation.
The analyst's remarks come at a time when the real estate market is grappling with challenges, including a decline in home sales and persistently high inflation in March. However, UBS's stance remains firm on the belief that the market's reaction to these events does not fully account for Zillow's individual growth prospects.
In summary, UBS's analysis suggests that the concerns surrounding the recent NAR settlement and its impact on the real estate market are overdone. The firm advises investors to consider Zillow's stock as a viable option, highlighting the company's potential for product innovation and market expansion despite the current industry headwinds.
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