Zillow (Z) Estimates Slashed at RBC Capital; PT Bumped to $34

RBC Capital analyst Mark Mahaney bumped his price target on Sector Perform Zillow (NASDAQ: Z) to $34.00 (from $31.00) following results but maintained a Sector Perform rating.

Mahaney commented, "Zillow reported in-line Q3 revenues and a meaningful EBITDA beat, though the Q4 top-line outlook came in weaker than expected and the 2016 growth and margin commentary appeared more conservative than Street estimates. We are materially lowering estimates (’16 EBITDA cut by 25%) and maintaining our Sector Perform rating."

The keys to the quarter, according to the analyst: 1) Deceleration Continues – Total revenue pro forma growth decelerated from 20% Y/Y in Q2 to 13% in Q3 (or ex-Market Leader, from 25% to 18%). 2) Agents Decline, ARPA Rises – Zillow had ~97K agent advertisers at the end of the September quarter, losing 4.3K agents in Q3 with ZG continuing to focus on increasing ARPA from its “super agents” rather than growing its overall agent count. ARPA came in at $402 in Q3, with advertisers who had been there for more than a year growing 50%+.

The firm have reduced 2016 Revenue/EBITDA estimates by 3%/25% to $815MM/$148MM

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 $29.50 yesterday.

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