Zillow Group (ZG) PT Cut to $85 at BofA Securities on Weakening Home Turnover

October 28, 2021 5:43 AM EDT
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Price: $54.16 -1.65%

Rating Summary:
    13 Buy, 15 Hold, 1 Sell

Rating Trend: Down Down

Today's Overall Ratings:
    Up: 14 | Down: 15 | New: 62
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BofA Securities analyst Nat Schindler lowered the price target on Zillow Group (NASDAQ: ZG) to $85.00 (from $100.00) while maintaining a Underperform rating after the company paused iBuyer home purchases (Zillow Offers) for the rest of the year to work through a backlog of properties already in the pipeline. BofA sees 3 likely reasons:

1) high demand and operational constraints related to labor, as called out by Zillow

2) execution, as Zillow has a history of somewhat inconsistent performance in iBuying

3) Zillow is starting to see weakness in the markets where it is operating and is thus at least temporarily pulling back

The analyst stated "Based on weakening mid-to-low-end home turnover and a sample of 301 properties owned by Zillow and listed for sale on its site, we believe weakening demand could be a potentially big issue and one that may not be fully appreciated by the Street. We lower our estimates and PO to $85 (from $100) which is now based on 11x ’22E IMT (internet, media & technology) EBITDA and 1x Homes and mortgage sales (12.5x and 1.5x previously). We believe lower multiples are justified on growing risks in each segment."


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