Zillow's Second Quarter Surprises Analysts: Company Exceeds Forecasts But Signals Future Challenges

Shares of Zillow Group Inc ZG Z were volatile heading into Thursday's trading session after the company issued second quarter earnings which beat consensus estimates. Here's what you need to know about the print, and what analysts think about the stock.

Zillow By The Numbers: The Seattle, Washington-based online real estate market place issued earnings of 39 cents per share, ahead of the 18 cent estimate, on revenues of $506 million, which beat the $471.59 million estimate.

The company said it outperformed the broader industry for the fourth consecutive quarter, and is focusing on improving customer experience in touring, financing, and renting.

Zillow anticipates its third-quarter revenue to fall between $458 million and $486 million, a range that is below the consensus estimate of $488.1 million.

What do prominent analysts have to say?

The Needham Analyst: Bernie McTernan reiterated a Hold raing on Zillow, while withholding a price target for the stock.

McTernan said despite strong second quarter results, driven by better revenue and stable expenses leading to margin expansion, Needham adjusted its estimates for the third and fourth quarter, reflecting lower revenue forecasts and slightly reduced expenses.

The Cannacord Analyst: Maria Ripps maintained its Hold rating, and its $52 price target on the stock.

Ripps said Zillow outperformed this quarter largely due to efficient operational execution and macro tailwinds. The decline in the company’s residential revenue was not as significant as expected, and there was an observed increase in the number of first-time homebuyers.

However, third quarter revenue and profitability guidance were slightly below expectations, though Zillow anticipates transaction volumes will beat the broader real estate market, the analyst noted.

Cannacord said it revised its revenue and profitability forecast downward due to persistent housing market uncertainties and planned hiring expansions, among other investments.

The KeyBanc Analyst: Justin Patterson maintained a Sector Weight rating, and did not update its price target for the stock.

Patterson noted that KeyBanc thinks Zillow shares are fairly valued right now due to macro conditions and near-term investment, which may lead to a more gradual onramp than Street models expect. The analyst said Zillow's renewed focus on converting leads will pay dividends, with higher Premier Agent revenue and EBITDA over time.

The JMP Analyst: Nicholas Jones maintained a Market Perform rating, and did not update its price target on the stock.

Jones said while Zillow appears to be gaining share in a challenged macro environment, JMP is looking for more evidence that the company’s recent innovations are driving durable share gains and
enhancing monetization to become more constructive for its shares.

The analyst said JMP sees room for Zillow's multiple to expand from current levels, but sees pressure on the stock in the near-to-medium term amid a tough industry and macro backdrop.

ZG Price Action: Shares of Zillow are trading 0.25% lower to $52.90, according to data from Benzinga Pro.

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