Zillow Housing Super App Strategy Is A 'Show-Me Story': Analyst

According to Keefe, Bruyette & Woods, Zillow Group Inc ( ZG )'s housing super app strategy aims to "narrow the gap between its audience share and transaction share. “

The Zillow ( ZG ) Analyst: Analyst Ryan Tomasello initiated coverage with a Market Perform rating and price target of $80.

The Zillow Thesis: While the housing super app strategy aims to increase market coverage from 21% to a target of 75%, should support growth, "management's financial targets appear aggressive at this early stage," Tomasello said in the initiation note.

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"On the other hand, we are bullish on Zillow's ( ZG ) ability to increase take rates in areas like its direct-to-consumer mortgage strategy, Zillow Home Loans," the analyst wrote. The strategy has the potential "to drive meaningful gains," he added.

Zillow ( ZG ) has a mixed track record of monetizing this large audience. As for the housing super app strategy, scalability remains "a show-me story," Tomasello said.

"On the macro front, weak home sales remain a drag on Zillow's ( ZG ) business, where the recovery timeline is uncertain," he further wrote.

Zillow ( ZG ) competes with well-capitalized competitors, including News Corp‘s realtor.com and CoStar‘s Homes.com.

Price Action: At the time of publication on Friday, shares of Zillow ( ZG ) had declined by 2.20% to $68.80.

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