Last night was interesting for Zillow with the stock travelling on a roller coaster, bouncing aggressively off of its intra-day lows but still finishing down more than 8%. The volatility that saw the stock down ~13% at its worst was caused by Google testing a new real estate advertising platform, which could rival Zillow’s services. Similarly, CoStar tumbled ~9% as the space braced for fresh competition from the tech goliath.
- Google is in test mode putting real-estate listings directly into search results, as well as links to request a tour and contact an agent – REA will likely be under pressure this morning.
While this is a ‘shot across the bow’ for real-estate listing platforms, it’s early days with questions over whether the mobile listings carousel might break the industry rules, which block one brokerage from advertising another’s listings. If indeed the Google results page violates MLS distribution rules, the overnight sell-off is overdone. While this is not a positive for Zillow, potentially weighing on growth, ZG US has been weak of late, down from a September peak of $US90, and now trades a ~25% discount to average multiples (EV/EBITDA).
- We believe the worries around Google are providing a buying, albeit aggressive, opportunity into Zillow: MM holds Zillow (ZG US) in its International Equities Portfolio.
MM is long and bullish towards Zillow
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