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Morgan Stanley cut the price target on Zillow Group (NASDAQ:Z) (NASDAQ:ZG) shares to $40 from $42 on Thursday, telling investors in a research note that confirmation of the housing slowdown leads them to lower 2023 revenue and EBITDA by 7%and 22%, respectively.
The analyst, who kept an Equal-Weight rating on the stock, said they are looking for a stabilization in housing data before becoming more constructive.
“Zillow’s 2Q:22 Premier Agent Revenue (“PA Revenue”) top-line miss (5% below us/$2mn below low-end of guide), and 3Q:22 PA Revenue guide down to $275mn-$295mn (~12% below our previous forecast at the high-end), confirmed our view that fundamentals for PA Revenue (part of IMT and very much the core business), over the near-to-medium term will be highly driven by macro trends in housing,” wrote the analyst.
He stated that the current housing data trend is negative.
“We lower total ’22/’23 revenue by 3%/7%. The downward revision is primarily driven by our Y/Y growth forecast for ’22/’23 PA revenue of -10%/+1%, lower than the ’22/’23 forecast for existing home sale transaction value (“market”) of -1%/+3%, and largely informed by soft macro. We also lower ’22/’23 EBITDA by 19%/22%, due to lower top-line, and largely unchanged OpEx. We expect Z to lean into Tech & Dev spend, but offset this by pulling back on discretionary Sales & Marketing,” the analyst added.
