By Sam Boughedda
Zillow Group, Inc. (NASDAQ:ZG) (NASDAQ:Z) was downgraded to Hold from Buy at Canaccord, with its price target lowered to $34 from $48 in a note to clients on Thursday, following the company's earnings release.
In addition, BofA reiterated an Underperform rating on Zillow .
Canaccord analysts told investors in a note that "Zillow's Q3 results came in well ahead of the muted guidance provided last quarter for y/y revenue declines. Users, visits, segment revenue, and adj. EBITDA all came in solidly ahead of CGe and consensus, helped by a temporary spike in lead volumes in August when interest rates briefly stabilize."
However, they added that Zillow's guidance for Q4 came in "meaningfully below expectations," based on a worsening real estate environment with growing, volatile mortgage rates impacting affordability and constricting shopping behavior.
"With mortgage rates at 20-year highs and more volatile than at any time since the early 1980s, we see risk to estimates for next year and the possibility of an extended top line decline and associated margin pressure. Therefore, we are lowering our rating to HOLD until the macro picture improves," the analysts added.
Meanwhile, BofA analysts stated that despite Zillow's Q3 beat, an "unrelenting housing downturn" has grounded Q4 expectations.
"Zillow guided to 4Q IMT revenues of $250-$270mn, below Street expectations at $279mn on difficult macro headwinds. Zillow expects $48-$63mn EBITDA, below Street at $92mn and our prior estimate of $72mn. Earlier this week, we lowered our 2022 real estate industry transaction estimates to -7% YoY from +6% previously and for 2023, we forecast transaction to decline 20% due to ongoing affordability headwinds," wrote the analysts.
After initially opening lower premarket, Zillow shares have jumped over 6%.