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Citi analysts started Zillow Group, Inc. (NASDAQ:ZG) with a Buy rating and $50 price target in a note to clients Tuesday.
The analysts explained that Zillow is undergoing a transformation from primarily an advertising/lead-gen solution with a $19 billion real estate advertising TAM to an “end-to-end transaction-focused platform associated with housing that consists of a $300 billion fee pool across real estate ($100 billion referral fees), mortgages ($155 billion of fees), Title & Escrow ($26 billion in fees), and rentals ($16 billion).”
“Management’s goal is to double its share of customer transactions from 3% in 2021 to 6% in 2025 and generate $5 billion of revenue and 45% EBITDA margins. To achieve this vision, Zillow is building out its services via a “Super App” concept with offerings across the home transaction experience,” added the analysts.
They explained that Zillow has highlighted five pillars to achieve its goal, which include touring, enhancing its partner network, financing, seller solutions, and the integration of services.
“Operationally, we look for Zillow to deliver improving margins. As of 3Q22, it has fully exited its iBuying business and sold its home inventory creating a path for the company to return to its more asset-light model leveraging its traffic lead and we believe the service is in the early innings of realizing monetization through its five growth pillars,” said the analysts.
