Zillow (NASDAQ:Z) shares have priced in a steady recovery in housing in 2024 and near record low home affordability could limit volume upside, Bank of America analysts acknowledged.
In downgrading Zillow (NASDAQ:Z) stock to ‘Neutral’ from ‘Buy’, the analysts also cited real estate commission lawsuits as being an overhang on Zillow's buy side agent lead generation segment, which make up nearly 50% of the company’s revenues.
"As (industry) comparables get more difficult in 2024, we believe outperformance will be increasingly dependent on initiatives under the housing 'super app' and rollout of enhanced markets that incorporate super app features," the analysts wrote.
To that end, they believe the initiatives will drive growth but expect more contribution in 2025 and 2026 as the rollout continues in 2024.
Thus, analysts at Bank of America raised their price objective on Zillow stock to $60 per share, from $47, to factor slightly higher real estate transaction growth in the fourth quarter of 2023 and 2024.
Shares of Zillow slipped 2% to $53.23 in early afternoon trading on Wednesday.