Zillow Group’s Price Target Lowered to $31 at Wedbush

Wedbush analysts lowered their price target on Zillow Group, Inc. (NASDAQ:ZG) to $31 from $39 given a higher rate environment.

According to the analysts, Q3/22 is trending in line with the company's guidance. The analysts believe the company’s premier agent (PA) revenue guidance for an approximately 20% decline at the midpoint appears prescient. The National Association of Realtors' monthly existing home sales data was 22% lower in July and 17% lower year-over-year in August.

30-year mortgage rates have risen from sub-3% in August 2021 to nearly 7% at the end of last week. With mortgage rates rising, the analysts lowered their estimates for what may be a slower pace of sales in 2022 and 2023 versus their previous expectations. The analysts’ Q3 adjusted EBIDTA estimate was reduced to $77 million from $85 million which is at the lower end of the company's guidance range of $73 to $88 million.

For 2022/2023, the analysts trimmed their adjusted EBITDA estimates to $555/$667 million from $644/$840 million to reflect a lower revenue estimate for both years.