DJ Zillow and Redfin Stock Have Soared. Why There Could Be More Growth Ahead. -- Barrons.com
Zillow shares have rallied more than 500% from their March 2020 lows, while Redfin has soared more than 700% in the same span. But an analyst at Goldman Sachs sees more growth ahead for both real-estate services providers.
Zillow (ticker: Z) shares got a boost on Friday from analyst Heath Terry who lifted his rating on the online real-estate services provider to Buy from Neutral, with a new target price of $200, up from $119. He also took Redfin (RDFN) to Neutral from Sell, with a new target of $78, up from $41.
Terry wrote in a research note that the upgrades reflect "ongoing growth acceleration in the real estate macro environment, a sustainable shift in real estate activity online, and the longer-term opportunity for these companies to capture share of industry economics."
Terry conceded he's playing catch up. "While we're clearly late ... given the pandemic driven outperformance across the internet sector, with housing activity and buyer demand continuing to accelerate, new listings growth and velocity offsetting challenges to supply and lower mortgage rates driving a more affordable buyer environment despite meaningful home price appreciation," he wrote. "We expect that the macro impact alone will lead to upward forward earnings revisions in the category as companies report results."
The analyst sees a continued shift of real-estate activity online, and added that he expects the companies to "improve conversion by reducing friction for buyers, sellers and agents [that] will ultimately allow both companies to exceed consensus expectations."
On Zillow, Terry wrote that his view is that "investments in technology and business model evolution to improve conversion of site visitors to home buyers and sellers, increase purchase and sale options, and enhance the experience for agents and consumers are likely to improve return on investment for agents and drive more spend to Zillow's properties."
On Redfin, Terry said his Sell rating was clearly wrong: "The pandemic drove significant acceleration in the real estate macro environment, agent efficiency growth at Redfin, and Redfin's resulting financial outperformance."
His revised view is that "growth in the existing home sales market and home price appreciation will continue to benefit Redfin's revenue growth."
Zillow shares were up 6.6% to $158.44. Redfin shares rallied 2.9%, to $83.83.
Write to Eric J. Savitz at firstname.lastname@example.org
(END) Dow Jones Newswires
February 05, 2021 12:30 ET (17:30 GMT)
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