NEW YORK (TheStreet) -- Zillow Group (Z) - Get Report shares are up 6.56% to $98.33 in trading on Monday after the online real estate brokerage company had its rating raised to "buy" from "neutral" by analysts at SunTrust

The firm also raised the Seattle-based company's price target to $130 from $110, a 32.8% premium over the stock's opening price today, with analysts anticipating strong long term growth for the company following its $2.5 billion acquisition of rival Trulia (TRLA) .

"We believe that as the better performing agents get more leads, conversion rate and ROIs will rise, creating significant pricing power for Z..." said analysts.

The company is scheduled to release its first quarter earnings results after the closing bell tomorrow with analysts forecasting an EPS loss of 11 cents per share on revenue of $137.50 million.

TheStreet Ratings team rates ZILLOW GROUP INC as a Hold with a ratings score of C-. TheStreet Ratings Team has this to say about their recommendation:

"We rate ZILLOW GROUP INC (Z) a HOLD. The primary factors that have impacted our rating are mixed some indicating strength, some showing weaknesses, with little evidence to justify the expectation of either a positive or negative performance for this stock relative to most other stocks. The company's strengths can be seen in multiple areas, such as its robust revenue growth, largely solid financial position with reasonable debt levels by most measures and expanding profit margins. However, as a counter to these strengths, we also find weaknesses including deteriorating net income, disappointing return on equity and weak operating cash flow."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • Z's very impressive revenue growth greatly exceeded the industry average of 5.9%. Since the same quarter one year prior, revenues leaped by 58.2%. This growth in revenue does not appear to have trickled down to the company's bottom line, displayed by a decline in earnings per share.
  • Z has no debt to speak of therefore resulting in a debt-to-equity ratio of zero, which we consider to be a relatively favorable sign. Along with this, the company maintains a quick ratio of 7.95, which clearly demonstrates the ability to cover short-term cash needs.
  • The gross profit margin for ZILLOW GROUP INC is currently very high, coming in at 92.11%. Regardless of Z's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, Z's net profit margin of -11.80% significantly underperformed when compared to the industry average.
  • The company, on the basis of change in net income from the same quarter one year ago, has significantly underperformed when compared to that of the S&P 500 and the Internet Software & Services industry. The net income has significantly decreased by 501.4% when compared to the same quarter one year ago, falling from $2.72 million to -$10.90 million.
  • Current return on equity is lower than its ROE from the same quarter one year prior. This is a clear sign of weakness within the company. Compared to other companies in the Internet Software & Services industry and the overall market, ZILLOW GROUP INC's return on equity significantly trails that of both the industry average and the S&P 500.
  • You can view the full analysis from the report here: Z Ratings Report

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