Zillow Group, Inc. (NASDAQ:ZG) (Z) was cut to Neutral from Buy, with its price target lowered to $47 from $60 per share by BofA in a note Wednesday.
Analysts said they are lowering the Zillow rating as the housing recovery is priced in.
"We believe the stock is pricing a steady recovery in housing in 2024 (shares are up over 40% y/y), near record low home affordability could limit volume upside (even w/ lower rates), and real estate commission lawsuits are an overhang on ZG’s buy-side agent lead generation segment (nearly 50% of revs)," analysts wrote.
While they expect a beat in 4Q23 on improved home volumes and are in line with the Street for 2024 revenues, the bank sees a "risk to EBITDA (we are 8% below Street) on what could be optimistic OPEX ests [estimates]."
Analysts also said that the company's growth initiatives will likely be more impactful in 2025 and 2026, although in the near term, commission lawsuits drive uncertainty for buy-side revenues.