Zillow Group (ZG) PT Cut to $31 at Susquehanna on Mediocre 3Q and Soft Outlook
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Susquehanna analyst Shyam Patil reiterated a Neutral rating and lowered his price target on Zillow Group (NASDAQ: ZG) to $31.00 (from $35.00) on a mediocre Q3 and soft outlook.
- Our thoughts going forward and upcoming catalysts. We reiterate our Neutral due to: 1) the lofty valuation (~7x EV/sales, which is the third highest in our group); and 2) mediocre fundamentals. Traffic and leads are decelerating, and we continue to hear cautious feedback regarding lead volume and quality for some larger agent customers. Upcoming catalysts include third-party traffic data for Zillow/Trulia and quarterly results.
- Mediocre 3Q… The key revenue line—Premier Agent revenue—was in-line with expectations. While EBITDA of $59m did come in ~$9m ahead, it was primarily due to lower opex which is being pushed into 4Q. Leads and traffic growth continued their pattern of deceleration.
- …And softer 4Q outlook. Overall revenue and EBITDA guide is below previous implied 4Q guide, our estimates and consensus. Premier agent revenue is expected to come in at $162m, largely in line with our previous estimate, but rentals & other revenue (one of the key future growth streams) was guided down ~9% vs previous implied 4Q guide. Management noted that PA revenue guide is conservative, though couldn’t quantify the magnitude when asked on the call. EBITDA is expected to come in at ~$48.5m, 2% below our estimate and consensus, as ZG noted that some expenses slated for 3Q will be pushed into 4Q.
Shares of Zillow Group closed at $32.78 yesterday.
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Create E-mail Alert Related CategoriesAnalyst Comments, Analyst EPS Change, Analyst EPS View, Analyst PT Change
Related EntitiesSusquehanna International Group of Companies
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