Citi analyst Ron Josey remains bullish on Zillow (Z) stock.
In a recent client note, Joshi called the stock a “buy” with a price target of $68, following the landmark $418 million settlement from the National Association of Realtors that resolved a commission rules lawsuit. The evaluation was repeated.
News of the settlement sent Zillow and other real estate companies' stock prices down last Friday, with investors believing the ruling would hurt real estate brokerage commissions and, by extension, marketing spend and lead generation on platforms like Zillow. I expected it to be negative. Zillow stock fell about 1% on Friday, trading at just under $51 per share.
But Josey doesn't think this development will fundamentally change Zillow's story.
“Our view here is that this settlement does not cancel or cancel the buy-side agent's commission. In fact, you can still proceed with it. And the sell-side agent can still proceed with it. It can be done, just probably not in a timely manner,'' Josey told Yahoo Finance Live.
As part of the settlement, NAR last week announced new rules that prohibit broker fees from being included on portals such as the Multiple Listing Service (MLS), where the majority of homes for sale in the United States are listed. However, Josie said these changes will not affect Zillow's online home listing platform.
“We don't think there will be any major disruption to the overall business, at least for the time being,” Joshi said.
“Now, let me be clear, [it is] It's still early…I think the new settlement will go into effect in mid-summer of this year. So we'll have to see what happens. ”
But other analysts are less optimistic about the settlement's impact.
“Zillow has historically had a buy-side lead, and they think that way now.” [is that buying agents] Their fees could come under pressure and go to zero, and that's bad for Zillow,” Nicholas Jones, an analyst at JMP Securities, told Yahoo Finance in a phone interview.
Jones said Zillow uses a market-based pricing approach, where based on how much agents spend, the platform funnels connect to those who spend the most. And about 70% of lead volume tends to be buy-side engagements.
Theoretically, if [buyers’ agents’] Income decreases, well, expenses decrease. [on] It's an advertising expense, right? It’s kind of a debate,” Jones said.
Meanwhile, real estate firm Compass announced Friday that it had reached a $57.5 million settlement to change its commission practices, the first such agreement to be announced since last week's NAR agreement. And, as The Wall Street Journal reported Friday, several other brokerage firms have settled fees-related lawsuits within the last year.
