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Zillow stock could surge on back of ad-hungry real estate agents

By Mike Wheatley | October 10, 2016

If you’re looking for some stock to invest it, you could do a whole lot worse than snap up a piece of Zillow, according to a number of experts.


Needham, the investment bank and asset manager, is recommending that its clients buy Zillow Group stock now, advising that it expects the company’s stock price to increase from its current level of $33 - $34 to $40.

StreetInsider reckons that the core revenue growth driver for Zillow is that agents are increasingly spending more of their marketing budgets on Zillow advertising, and that’s set to boost the company’s stock considerably.

"We believe Zillow’s core addressable market is significant and expanding opportunity with sizable adjacent markets, such as mortgages and rentals layering on additional growth opportunities," said analyst Kerry Rice. "We expect margins to expand on solid revenue growth.”

Needham isn’t alone in betting on Zillow, as RBC Capital has also increased its price target for Zillow to $42.

One major factor in Zillow’s favor is that the competition is “limited” and its lead is therefore “extending”, Needham said in its guidance.

Needham’s advice supports what Zillow CEO Spencer Rascoff made clear last year when he talked about the company’s business model.

“We sell ads, not houses,” Rascoff said during Zillow Group’s first quarter earnings last year. “We’re all about providing consumers with access to information and then connecting them with local professionals.”

“And we do a great job of giving those local professional high-quality lead, they’ll covert those leads to at a high rate and then want more media impressions from us,” he said. “So we’re not actually in the transaction, we’re in the media business.”

Zillow’s biggest rival is probably Move, Inc., but the site’s popularity still trails Zillow by some distance. Zillow acquired its other major rival Trulia Inc. for $2.5 billion back in 2015.

Mike Wheatley is the senior editor at Realty Biz News. Got a real estate related news article you wish to share, contact Mike at [email protected].
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