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Guggenheim gets bullish on Zillow's Offers business

Online real estate company Zillow (ZG) scored a vote of confidence Wednesday from Guggenheim Analyst Jake Fuller, who upgraded the stock to “buy” and introduced a new price target of $45 a share.

In a note to investors, Fuller highlighted the company's growing home-buying service, Offers.

“It may take years to fully realize the vision, but we believe ZG is off to a strong start,” Fuller said.

The service allows homeowners in eight markets to sell their properties to Zillow, and then Zillow will list the home for resale after making repairs and cosmetic upgrades.

Fuller said Offers has surpassed expectations and that he see’s the new segment topping ad revenue in the fourth quarter. He said “recent results prove that demand for Offers is real.”

Home For Sale Real Estate Sign and Beautiful New House

Zillow bought 898 homes in the first quarter of this year, that’s up 80% from the fourth quarter. According to Zillow’s data, it received 35,000 requests for an offer to buy a home. That, Fuller says, would tally up to a demand of around $10 billion in transaction volume.

Zillow is planning to expand the service to 20 markets by 2020, and could capture between 4% and 6% of home sales in those markets over the next 3 to 5 years, Fuller said.

The company’s "Premier Agent" advertising business also caught the attention of Fuller, who said the segment looks to have "significant value."

The call comes after real estate platform reported first quarter earnings results Tuesday. The company reeled in $454.1 million in revenue, a 51% increase year over year.

Zillow’s competitors include Redfin (RDFN) and Opendoor.

Bridgette Webb is a producer at Yahoo Finance. Follow her on Twitter @bridgetteAwebb.

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