Zillow Group Shares Downgraded Following Q3 Earnings on Macro Pressures

Zillow Group (NASDAQ: ZG) reported third-quarter earnings after the close on Wednesday, topping profit and revenue estimates, but the stock has been downgraded in the aftermath by one analyst based on macro pressures.

The online real estate brokerage reported adjusted earnings of $0.38 per share, beating the average analyst estimate of $0.14, while revenue of $483 million fell 12% but exceeded analyst expectations of $460 million. The net loss was $53 million compared to last year's $329 million.

Zillow said it completed the winding down of its iBuying business on September 30. It sees fourth-quarter consolidated revenue at $410 million.

Also Read: The US is in a ‘Housing Recession’ – Zillow Group to Fall Further?

“We're making progress in each of our growth initiatives: touring, financing, seller solutions, enhancing our partner network and integrating our services. Having a well-capitalized business that produces operating cash flow gives us an advantage in navigating the choppiness of the current housing market,” said Zillow co-founder and Chief Executive Rich Barton.

Following Zillow's earnings release, Canaccord analyst Maria Ripps downgraded the company's shares to Hold from Buy, cutting the firm's price target on the stock to $34 from $48.

Ripps said in a note to clients that Zillow's fourth quarter guidance was meaningfully below expectations, reflecting a worsening real estate environment with rising, volatile mortgage rates affecting affordability and impacting shopping behavior. With mortgage rates at 20-year highs, the analyst believes there are risks to estimates for next year, as well as the possibility of an extended sales decline and margin pressure for Zillow. As a result, the analyst said she is downgrading the stock “until the macro picture improves.”

Zillow Group shares are down over 4% premarket following the earnings release.