Zillow (NASDAQ:Z) reported better-than-expected third-quarter earnings, primarily driven by its marketing services for real estate agents, despite a sluggish housing market.
The company's revenue for the quarter stood at $496 million, surpassing the average analyst estimate of $481 million.
Zillow (NASDAQ:Z)'s core residential business revenue declined by 3% year-over-year to $362 million, even as the overall value of home transactions in the industry dropped by 14%.
Although rising mortgage rates have dampened existing home sales, Zillow (NASDAQ:Z)'s website traffic remained strong, with over 2.6 billion visits during the quarter, just 5% lower than the previous year.
The real estate sector has come under scrutiny following a Missouri jury's decision that alleged collusion within the National Association of Realtors (NAR) to artificially maintain agent commissions. While NAR plans to appeal, Zillow, though not a defendant in the lawsuit, could be indirectly affected due to its reliance on buyer's agents for revenue.
In a letter to shareholders, Zillow's CEO, Rich Barton, expressed confidence that the company could prosper even in the event of a "complete disruption to the existence of buyer's agents," although he considers this scenario unlikely and undesirable for consumers. He believes it could lead to "a larger and more profitable business model for Zillow."
Despite legal uncertainties, Zillow's shares closed at $35.79 on Wednesday, up 15% from the year's beginning. However, the Missouri jury's verdict has created volatility in the real estate market, with potential implications for Zillow's business model and near-term revenue challenges.
Jefferies analysts recently reduced Zillow's price target from $60 to $48 due to these uncertainties.