Zillow Upgraded - Deutsche Lauds Agent and Offers Units

Numerous factors can push Zillow stock higher, Deutsche analyst Lloyd Walmsley said in upgrading the stock to buy.
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Zillow Group  (ZG) - Get Report shares rose Wednesday as Deutsche Bank analyst Lloyd Walmsley raised his rating on the real estate company to buy from hold and lifted his share-price target to $106 from $75.

Shares of the Seattle company recently traded at $91.90, up 4.1%. The stock had soared 93% year to date through Tuesday.

Earnings estimates have "meaningful upside" potential and numerous factors can push the stock higher, Walmsley said in a commentary cited by The Fly.

Zillow has pushed its Premier Agent business "back on a stable footing," Walmsley said. It now has better lead generation for agents, and conversion of those leads can boost revenue over the next year, he said.

Seller leads from the Zillow Offers business also will probably create a "healthy" revenue share next year, Walmsley said.

Meanwhile, mortgage applications rose 35% year-over-year in the past week, though they dipped 2% from a week earlier, according to the Mortgage Bankers Association.

Morningstar analyst Yousuf Hafuda sees strength for Zillow’s business, but says its stock is overvalued.

“Even though the current environment remains highly uncertain, the lift in the housing market has been a boon to Zillow's performance,” he wrote in a commentary last month.

“As a result, we are raising our fair-value estimate to $40 from $35. We caution that [the] shares are currently overvalued, as we believe investors are not pricing in many of the risks that accompany the previously untested iBuying business model. 

"And [the stock] would have to fall significantly in price before Zillow would warrant a second look.”