Zillow Group price target lowered to $48 from $60 at Jefferies

Jefferies lowered the firm’s price target on Zillow Group to $48 from $60 and keeps a Buy rating on the shares after the jury in a major class action lawsuit on agent commissions concluded yesterday that defendants conspired to inflate commissions. Major changes to compensation practices could significantly reduce buyer agents, which would force Zillow to pivot its business model, creating execution risk and potential near-term revenue headwinds, said the analyst. While the firm thinks the decision increases the chances of a ban on commission sharing and Zillow having to pivot the business model, it says the impact to Zillow’s Premier Agent business is “hard to determine at this point” given unknowns regarding a potential injunction, the pace of changes, and the company’s ability to mitigate. In addition, while a near-term headwind, it could be a long-term tailwind for Zillow as the firm thinks the U.S. market could look more like international markets, where seller agents rely on listing portals to attract potential buyers to their listings.