Zillow (NASDAQ:Z) is positioned for another quarter of outperformance in the fourth quarter as US housing momentum shows signs of strengthening, according to analysts at Jefferies.
The firm repeated its ‘Buy’ rating on the real estate platform with a $100 price target, implying upside of about 35% from current levels.
“Our bullish view on Z is supported by tailwinds from a housing recovery, revenue from new products, and peer-high incremental margins,” the analysts wrote.
Jefferies wrote that its review of October existing home sales data suggests gross transaction value (GTV) is pacing toward approximately 6% year-over-year growth in the fourth quarter. That would mark about 200 basis points of sequential acceleration despite a tougher comparison period, and also exceeds the growth expectations implied in Zillow’s existing guidance.
“The acceleration is also better than Z’s outlook embedded in guidance, which suggests Q4 is tracking toward a 17th straight beat,” the analysts wrote.
The firm noted the consensus estimate of 7.7% year-over-year residential revenue growth for Zillow in the fourth quarter, reflecting about 150 basis points of outperformance relative to housing market expectations if current patterns hold.
Zillow has outpaced the broader housing market by an average of about 350 basis points so far this year, and Jefferies believes growth closer to 9.5% would be consistent with both guidance and typical performance trends.
The October data supports the firm’s bullish view on Zillow. During the month, existing home sales transaction value rose 6.5% from a year earlier, while the average sale price increased 3.5% year-over-year.
Rental vacancy rates also moved higher, which Jefferies sees as a positive for Zillow’s rental revenue since higher vacancies generally push landlords to advertise more.
Weekly mortgage applications have grown 22% on average so far in the fourth quarter, signaling resurgent buyer interest and potential volume momentum into year-end.
Jefferies acknowledged a number of ongoing legal matters and the potential competitive implications of the planned Compass–Anywhere Real Estate merger on Zillow, but it views both issues as manageable.
“Key overhangs appear overblown,” the analysts wrote, arguing that Zillow’s listing standard, which restricts publication of non-MLS listings unless they are shared broadly within one day of public marketing, should limit any material competitive impact.
The firm also sees limited downside risk tied to lawsuits involving CoStar Group and the Federal Trade Commission, and believes RESPA-related claims are defensible given agent incentives around mortgage pre-approval rather than closing.