Analysts Slash Zillow Group Price Target On Dismal Q3, Business Exit Plans
Analysts downgraded rating and price target on Zillow Group Inc (NASDAQ: ZG) following Q3 earnings miss and exit from iBuying business.
Piper Sandler analyst Thomas Champion downgraded Zillow Group to Neutral from Overweight with a price target of $78, down from $117, implying an 8.75% downside.
The company's Q3 results missed estimates, and more significantly, Zillow announced the winding-down of the ZOffers home-buying business.
The announcement "caps the uncertainty" surrounding the pause first announced on October 18, says the analyst.
Champion says the "major strategic shift" raises questions about Zillow's future direction and execution capability.
Truist analyst Naved Khan downgraded Zillow Group to Hold from Buy with a price target of $83, down from $140, suggesting a 3% downside.
While the Zillow Homes exit with sizable losses may prove the right strategic move over medium- to long-term, it removes a near-term growth catalyst. It raises questions about Zillow's efforts to monetize additional services.
The analyst is moving to the sidelines while awaiting clarity on Zillow's growth prospects.
Evercore ISI analyst Mark Mahaney downgraded Zillow Group to In-Line from Outperform with an $89 price target, suggesting a 4% upside.
JMP Securities analyst Ronald Josey downgraded Zillow Group to Market Perform from Outperform.
The analyst cites its announced plans to exit the iBuying business and views its core Premier Agent as becoming "increasingly mature." Josey adds that Zillow has high levels of direct traffic and is a well-established brand, but its shares are now "fairly valued."
Stephens analyst John Campbell lowered the price target on Zillow to $130 from $217, after the company reported "messy" quarterly results as the Homes segment fallout drove a combined top-line miss and a "considerable" EBITDA miss.
Though news of Zillow winding down its iBuying operation dominates the conversation coming away from Q3, he believes that "investors should not overlook the strength across the core," and he keeps an Overweight rating on the shares.
News of an outright shutting down of its iBuying business "strikes us a net-positive event over the long haul," added Campbell.
BofA analyst Curtis Nagle lowered price target on Zillow Group to $50 from $85 and kept an Underperform rating.
BTIG analyst Jake Fuller downgraded Zillow Group to Neutral from Buy.
Benchmark analyst Daniel Kurnos lowered the price target on Zillow to $105 from $200 and kept a Buy rating on the shares.
The core IMT business posted "another solid quarter" with upside in both revenue and EBITDA and the company's statement that margins are expected to be sustainable north of 40% even factoring in ongoing investment "probably would have sent the stock meaningfully higher" in "a normal quarter," but this was "not a normal quarter," Kurnos said.
Zillow will "probably be in the short-term penalty box," but he has consistently stated that he believes the IMT business is worth over $100 per share, "and for that reason alone we are not downgrading the stock," Kurnos added.
Canaccord analyst Maria Ripps lowered the price target to $120 from $165 and maintained a Buy rating on the shares.
The analyst said the company's profitability from the core Premier Agent business was partly offset by headwinds for its iBuying operations, resulting in the announcement that the company will be winding down Zillow Offers. She said the employee retention and termination expenses and other costs associated with its contractual obligations will lead to additional pre-tax charges during Q4 and 1H22.
Related Content: Zillow Shuts Down Home Flipping Business, To Lay Off 25% Of Workforce
2 Reasons Zillow Selling 7,000 Houses Is 'A Clear Negative' For Investors
Price Action: ZG shares traded lower by 15.28% at $72.42 in the premarket session on the last check Wednesday.
Latest Ratings for ZG
Nov 2021 | Craig-Hallum | Maintains | Buy | |
Nov 2021 | DA Davidson | Maintains | Buy | |
Nov 2021 | RBC Capital | Maintains | Outperform |
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