Shares of Zillow Group Inc. were knocked lower Wednesday following a Wall Street analyst’s call to stop buying, saying prices already reflect a recovery in the housing market. BofA Securities analyst Curtis Nagle said uncertainties over lawsuits on the commissions paid out to real-estate agents could also pressure the online real-estate-services company’s stock in the coming months.
The more active Class C shares
Z,
-2.02%
ZG,
-1.99%
dropped 1.7% in morning trading after Nagle downgraded them to neutral from buy. The stock was headed for its sixth loss out of 2024’s seven trading sessions, for a year-to-date decline of 5.8%. That follows a 41.3% surge in December, which was the best monthly performance for either the Class C or Class A shares since the company went public in July 2011. The S&P 500
SPX
gained 4.4% in December. With that December rally, Nagle said the stock has already priced in a “steady recovery in housing in 2024.” He worries, however, that even if interest rates decline as expected, continued “near record-low home affordability” could continue to hamper the housing market. In addition, a recent court ruling that the National Association of Realtors and two real-estate brokerages conspired to inflate commissions could hurt Zillow’s buy-side-agent lead-generation business, which represents nearly half of the company’s revenue. “We do not expect a banning of commission sharing from the suits (which could be a major headwind to [Zillow revenue] and burden to homebuyers) and expect [Zillow] to successfully adapt to changes on revenue diversification,” Nagle wrote in a note to clients. “However, we expect uncertainty to be an overhang on valuation until more clarity is brought on the issue, starting with a final verdict for Sitzer in April.” An initial verdict in the case known as Sitzer/Burnett was reached in October. The risks from the lawsuits for …
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The more active Class C shares
Z,
-2.02%
ZG,
-1.99%
dropped 1.7% in morning trading after Nagle downgraded them to neutral from buy. The stock was headed for its sixth loss out of 2024’s seven trading sessions, for a year-to-date decline of 5.8%. That follows a 41.3% surge in December, which was the best monthly performance for either the Class C or Class A shares since the company went public in July 2011. The S&P 500
SPX
gained 4.4% in December. With that December rally, Nagle said the stock has already priced in a “steady recovery in housing in 2024.” He worries, however, that even if interest rates decline as expected, continued “near record-low home affordability” could continue to hamper the housing market. In addition, a recent court ruling that the National Association of Realtors and two real-estate brokerages conspired to inflate commissions could hurt Zillow’s buy-side-agent lead-generation business, which represents nearly half of the company’s revenue. “We do not expect a banning of commission sharing from the suits (which could be a major headwind to [Zillow revenue] and burden to homebuyers) and expect [Zillow] to successfully adapt to changes on revenue diversification,” Nagle wrote in a note to clients. “However, we expect uncertainty to be an overhang on valuation until more clarity is brought on the issue, starting with a final verdict for Sitzer in April.” An initial verdict in the case known as Sitzer/Burnett was reached in October. The risks from the lawsuits for …nnDiscussion:nn” ai_name=”RocketNews AI: ” start_sentence=”Can I tell you more about this article?” text_input_placeholder=”Type ‘Yes'”]