The Street's Mixed Reaction To Zillow's Q3, One Analyst Says 'Game Over'

Online real estate database company Zillow Group Inc Z ZG reported Tuesday its third-quarter results and fourth quarter guidance, which may have caught some investors off guard given the immediate sell off in the stock.

Here is a summary of how some of the Street's top analysts reacted to the print.

The Analysts

• Canaccord Genuity's Maria Ripps maintains a Buy rating on Zillow with a price target lowered from $60 to $50.
• Susquehanna Financial Group's Shyam Pail downgraded Zillow from Neutral to Negative, price target lowered from $42 to $23.
• DA Davidson's Tom White maintains at Neutral, price target lowered from $52 to $38.
• Wedbush's Ygal Arounian maintains at Neutral, price target lowered from $45 to $30.

Shares of Zillow hit a new 52-week low of $30.17 Wednesday and were down more than 20 percent on the day.

Canaccord: 'Speed Bump'

Zillow's third quarter is highlighted by one notable "speed bump," Ripps said in a note. The company's Premier Agent (PA) business fell short of expectations and partially resulted in a concerning fourth quarter guidance. Headwinds to the business appears to be temporary as the company continues to focus on improving lead quality, which disrupted advertisers in the third quarter.

Susquehanna: 'Game Over'

Zillow reported a weak quarter especially within the PA business, which is "the key line item" for investors to watch, Pail said in a note. The performance offers the "clearest evidence yet" the business is in trouble as agents are fleeing the platform.

The report also changes the narrative surrounding the company away from its "strong competitive positioning," towards a company riddled with "serious problems" in its core business, the analyst said.

DA Davidson: Long-Term Versus Near-Term Debate

Short-term investors are likely feeling some pain after Zillow reported two consecutive concerning quarters that include lowered guidance, White said in a note. But investors with a longer-term perspective are crediting Zillow for the many steps it has taken to not only stay ahead of the real estate space but position itself for an eventual fully-digital and mobile real estate environment.

Nevertheless, the near-term outlook within the PA business is a concern for at least the next few quarters which warrants a neutral stance on the stock.

Wedbush: Cautious Near-Term Setup

Some of the pressures Zillow felt in the third quarter could prove to be temporary as agents on the platform cycle through the lead generation changes, Arounian said in a note. Meanwhile, macro-economic factors including a slowing housing market and cyclically sensitive new business leads prompts a cautious near-term stance on the stock.

Related Links:

Bank Of America: Zillow Falls On 'Concerns About Homes, Entry Into Originations'

Morgan Stanley's New Valuation Of Zillow Prompts Downgrade