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Trulia (TRLA) Deal a Big Strategic Positive for Zillow (Z), RBC Says; Not Much Visitor Overlap

July 28, 2014 12:00 PM EDT
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Price: $47.67 --0%

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    16 Buy, 12 Hold, 1 Sell

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    Up: 9 | Down: 7 | New: 39
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RBC Capital analyst Mark Mahaney weighed in on Zillow (NASDAQ: Z) amid today's $3.5 billion all-stock takeover of Trulia (NYSE: TRLA). The analyst views the deal as a strategic positive for Zillow.

Mahaney view this acquisition as a natural consolidation within the Online Real Estate industry with significant opportunities for scale remaining. He said the synergies of this deal are augmented by the limited overlap between companies. "Roughly half of Trulia’s monthly visitors do not visit Zillow and roughly 2/3 of Zillow’s monthly visitors do not visit Trulia," Mahaney said. "We believe real estate agent overlap is higher, however."

The analyst sees Financial implications of the deal, as well. "If the companies can meet their $100MM annualized cost avoidances goals – which implies approximately 10% of their combined 2016 cost structure and seems achievable tho not easy – this would generate approximately 40% EBITDA accretion," he said.

Despite the positives of the deal, the firm maintained a Sector Perform rating on Zillow.

For an analyst ratings summary and ratings history on Zillow click here. For more ratings news on Zillow click here.

Shares of Zillow closed at $158.86 yesterday.



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