Canaccord lowers Zillow target to $115; Barclays lowers to $95

Analysts: Short-term distractions shouldn’t take away from explosive potential

Canaccord Genuity on Wednesday morning lowered its target for Zillow Group (Z) to $115 from $125, citing concerns raised in an investor call Tuesday over the weakness from the recently acquired Trulia.

Around noon, Barclays lowered their target for Zillow to $95 from $105 on similar concerns.

The bottom line seems to be that in the short-term Zillow is facing challenges owing to the ongoing integration of Trulia into its strategy, but they can maximize a whole new slate of opportunities in the long-term that offer the potential for explosive growth.

Canaccord says in client note that it is worried about a “very distracted sales force” and a change in strategy at Trulia’s market leader division. In a call Tuesday morning with investors, Zillow Group CEO Spencer Rascoff provided an update on the Zillow-Trulia integration, and while the company has made “great strides” in the eight weeks since the merger was completed, Rascoff called 2015 a “transition year” and disclosed that the company expects 2015 revenue of $690 million, well below the market consensus of $753 million.

The integration is taking longer than expected, Rascoff admitted on the call. But once complete, Zillow’s future will be “incredibly bright,” he said.

The Canaccord analysts are also more positive about Zillow’s long-term outlook, saying that the benefits of the acquisition of Trulia will kick in, and that the potential for ad price growth is explosive.

Canaccord analysts say that they see great potential going forward despite the increasingly strong competition the firm faces in the online listings space.

Last week, Barclays downgraded Zillow Group to Equal-Weight from Overweight, citing fears of slowing traffic.

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

On Wednesday morning, Barclays analysts said that while they, too, see the long-term potential for Zillow, 2015 will be a challenging year because of issues like tough comps related to their lender co-marketing program, what’s going on with Trulia salespeople facing distractions and challenges selling the Trulia brand.

Zillow was trading above $93 in early afternoon activity Wednesday, up 1.5%.

3d rendering of a row of luxury townhouses along a street

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