The upgrade comes after Zillow said it would suspend its internet home-buying service, Zillow Offers, in all 24 markets in which it operates in response to the coronavirus, which has ground the real estate market to a halt nationwide.
Zillow said it expected to be within or exceed its first-quarter outlook, but it withdrew the full-year 2020 outlook that it issued Feb. 21.
Analyst Tom White lowered his financial estimates and price target for the Seattle company to $39 a share from $60.
"The 52% pull-back in ZG shares in the past month (vs. an about 28% decline for the Nasdaq) combined with management's recent steps to derisk the business in the face of Covid-19 have created a compelling opportunity to own one of the highest-quality brands and assets in midcap U.S. internet in our view," White said in a note to clients.
White noted Zillow's stewardship and stress-testing of its balance sheet significantly reduces the company's risk profile.
"These steps should ensure the company will successfully emerge from this crisis (and potentially in an even stronger market position)," White said.
White said Zillow has announced concrete steps to offset anticipated revenue loss with logical and somewhat obvious expense reductions, and expects it can reduce its quarterly expense run rate by at least 25% this year.
"The fact that ZG will still be able to achieve its first-quarter outlook (provided on 2/19) highlights how both the company's business and the backdrop for broader U.S. residential real estate were in great shape entering this year," he said.
Meanwhile, Benchmark analyst Daniel Kurnos lowered his price target on Zillow to $57 from $75 and affirmed his buy rating.
He said Zillow's underlying financial stability may pressure competitors with weaker balance sheets.
JMP Securities analyst Ronald Josey lowered his price target on Zillow to $41 from $77 but kept an outperform rating on the shares.
Josey said he expects Zillow's earnings to fall, but he is confident in the company's ability to manage demand during this period as well as its "ample liquidity" to weather the worst-case scenario in real estate.
At last check Zillow shares were up 15% at $34.71.