Barclays downgrades Zillow on market saturation fears

Traffic growth is slowing, stock down near 52-week lows

Barclays downgraded Zillow Group (Z) Monday morning to Equal-Weight from Overweight, citing fears of slowing traffic.

The British financial services company’s analysts say they are worried that traffic growth for Zillow and Trulia is slowing and the market for the online listings giant is saturated.

Zillow’s year-over-year decline in traffic growth is “drastic” analysts say.

Of great concern to analysts, Zillow recently ceased reporting monthly traffic trends. Zillow ceased posting monthly traffic trends as of March, with a spokesperson telling HousingWire on March 2 the following:

"Due to the complexity involved with tracking metrics across newly acquired brands and multi-platform users across mobile apps, mobile web, and desktop, beginning in March 2015, Zillow will no longer release its monthly unique user metrics on the Zillow Investor Relations page." 

But that doesn't sit well with analysts, who cite the redaction of the reports and the long-term trend as troubling.

January 2015 saw 24% traffic growth on an annualized basis. That contrasts with the annual traffic growth seen in January 2014 which was 52%.

Zillow last week reported that the Arizona Regional Multiple Listing Service, Georgia-based First Multiple Listing Service and Washington D.C.-based Metropolitan Regional Information Systems all signed listing agreements with Zillow and Trulia. In addition to those three, Zillow also said it signed a “record-setting” number of listing agreements, adding 33 new MLSs total this week.

However, Barclays said that it expects Zillow is cutting deals at deep discounts with large brokerages, which could hurt revenues in the near term.

Zillow was trading below $99.50 in mid-morning action, near the bottom segment of its 52-week range of $84-$165. The trading price is down 13.2% in the last 30 days and 20.82% in the last three months. 

Zillow did not respond to a request for comment by publication time. This story will be updated if Zillow replies to the inquiry. 

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