Zillow Group Upgraded by Jefferies to Buy

Zillow will benefit from 'a strong housing market in 2021 supported by macro tailwinds,' a Jefferies analyst says.
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Zillow Group  (Z) - Get Report should benefit from a strong housing market in 2021, according to a Jefferies analyst who upgraded the online real-estate buying and selling platform to buy from hold and raised his price target to $175 from $120.

Shares of the Seattle-based company were down 1.8% to $142.05 in early trading on Monday. 

"We see a strong housing market in 2021 supported by macro tailwinds like peak housing formation and low interest rates, contributing to attractive top-line and bottom-line momentum for Z's legacy IMT (internet, media, and technology) business," analyst Brent Thill said in a note to investors. "We believe potential upside to IMT profit puts a floor on downside risk and is a dynamic not well understood by the market."

Thill also said he thinks the Zillow Offers "iBuying" business allows the company to tap into $1.9 trillion in U.S. housing transactions, expanding the addressable market and creating an attractive risk-reward.

Zillow's core IMT revenue continues to accelerate while margins expand at an attractive pace, Thill said, and the company continues to expand Zillow Offers to new markets while keeping losses at a manageable level.

Thill added that the coronavirus pandemic "is driving increased use of real estate portals by consumers, increasing lead volume/quality, and driving opportunities to enhance agent monetization." He noted that "a shortage of available inventory (exacerbated by the pandemic) and a desire to avoid human contact will drive increased demand for Zillow Offers."

Zillow provides inventory across the country along with technology that allows prospective buyers to shop for homes and take virtual tours.

In November, Zillow Group posted earnings and revenue that beat analysts’ forecasts and raised its full-year outlook.