Baird starts Zillow coverage with neutral, notes market leadership

Investing.com -- Baird initiated coverage of Zillow Group (NASDAQ: ZG) with a "Neutral" rating given the company's leadership in the U.S. online real estate marketplace but flagging profitability concerns and competitive risks.

The brokerage noted Zillow's dominant traffic share, strong brand, and ongoing initiatives in tour scheduling, mortgage origination, and rental listings. However, it also noted that aggressive competitor spending and industry changes pose challenges.

“We like Zillow's clear marketplace leadership in a potentially sizable market/TAM, with a category-leading brand and historically sticky and cost-effective very high audience share/traffic. We also like its current initiatives,” analyst said.

While Zillow could benefit from a recovery in U.S. home sales, Baird pointed to its high stock-based compensation costs and low profitability as key concerns, keeping its valuation outlook balanced.

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