By Michael Elkins
Citi reiterated a Buy rating and $50 price target on Zillow Group Inc (NASDAQ:Z). Zillow’s stock closed trading down 5.31% on Wednesday after News Corp (NASDAQ:NWSA) confirmed that it’s considering the sale of Move Inc. to CoStar Group Inc (NASDAQ:CSGP). News reports have separately indicated that the sale is being worked on at a ~$3 billion valuation.
The move would raise the competitive bar for the real estate technology sector as Move Inc. is the operator of Realtor.com with ~93 million monthly active unique users. That compares to Zillow at ~236 million, and Redfin (NASDAQ:RDFN) at ~51 million. However, if a deal goes through it would significantly increase CoStar’s presence in residential real estate technology/web portal traffic.
That said, given Zillow’s leadership position in terms of traffic with 236 million monthly UVs, brand awareness, and focus on product innovation as it transitions to an end-to-end transaction-focused platform, Citi analysts do not believe there would be a material share shift across the sector should there be an acquisition, at least not in the near to medium term.
The analysts wrote in a note, “While an acquisition of Realtor.com likely creates a more competitive market within residential real estate, we believe Zillow’s product experience, broad awareness across its brands are core differentiators. In many ways this potential transaction reminds us of the consolidation in the sector in 2014 when News Corp announced its acquisition of Move Inc. shortly after Zillow announced its acquisition of Trulia. Since then, Zillow has added ~100 million monthly UUs.”
Shares of Z and CSGP are up 0.71% and 0.94%, respectively, in pre-market trading on Thursday.
Shares of NWSA are down 0.62% premarket.