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Zillow Group Banks on Strategic Efforts to Boost Business

Zacks Equity Research

Zillow Group, Inc. ZG is witnessing a notable run on the bourses with shares rising 11.6% on a year-to-date basis compared with the industry’s rise of 1.8%. The upside can be attributed to the company’s focus on robust initiatives including partnerships and product roll outs, which are aimed at making home shopping convenient.

The company recently inked deals with approximately 250 brokerage partners and franchisee companies based in Canada. The latest brokerage partners including RE/MAX Condo Plus, iPro Realty, PSR Brokerage and Living Realty will be able to list properties on the company’s website — Zillow.com — and mobile app.

The partnership provides Zillow Group a wider access to agents and brokers, which is expected to improve the Premier Agent Business and expand presence in Canada. Notably, the company witnessed an increase of 32% in monthly unique users in Canada on a year-to-date basis.




Moreover, the company is benefitting from robust demand for Zillow Offers. Zillow Group recently launched Zillow Offers in Fort Lauderdale, Miami, and select parts of South Florida. In the second quarter, the company received more than 69,000 Zillow Offers seller requests in 11 markets. The company plans to introduce Zillow Offers in around 26 markets by the mid 2020, which includes Cincinnati, Tucson, Ariz, Oklahoma City and Jacksonville, FL.

Expanding geographic market reach via strategic alliances and upscaling Zillow Offers is expected to drive the top line in the days ahead. Further, Zillow Group is striving to increase audience size by integrating its offerings with easy payment options and Zillow Home Loans solutions. These initiatives are expected to improve consumer engagement and bolster purchases on the platform, which will drive growth.

Key Growth Drivers

Zillow Group regularly adds new features to bolster experience for property managers and consumers. With the combination of machine learning and personalization, the company anticipates to align consumer interest with the listed properties. The company’s application that enables agents to create 3D home tours is quintessential in this regard. This enables buyers to narrow down their searches before a personal visit.

Moreover, strength in offerings that include Rental Inforum and ‘My Agent’ bode well. These initiatives are aimed at property managers to make them better understand the preferences of consumers.

Improvement in the company’s product lines is expanding user base and visitors on its platform, which is boosting revenues. Notably, in the second quarter, traffic increased about 4% to more than 194 million average monthly unique users. Visits rose 14% year over year to more than 2.2 billion.

Users are shifting to the internet and mobile devices for real estate information. Increasing app downloads and website visitors are a positive as it enhances the probability of generating leads for agent advertisers.

Wrapping Up

Zillow Group’s growth can be attributed to its Premier Agent Business, new construction marketplaces and increasing traffic at its mobile apps as well as websites. Moreover, the company has a strong balance sheet, which is expected to aid it in capitalizing on investment opportunities and pursue strategic acquisitions.

However, intense competition from similar online real estate platforms, increasing mortgage interest rates and higher advertising spend are major headwinds. Moreover, spending in product enhancements is likely to hinder margin growth at least in the near term.

Zacks Rank & Key Picks

Currently, Zillow Group carries a Zacks Rank #3 (Hold).

Some better-ranked stocks worth considering in the broader sector are Anixter International AXE, LogMeIn LOGM and Perficient PRFT, each flaunting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Long-term earnings growth rate for LogMeIn, Anixter and Perficient is currently pegged at 5%, 8% and 10.75%, respectively.

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