Buy Zillow Stock, Analysts Say, Because the Home-Flipping Market Might Be Undervalued

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Jefferies analyst Brent Thill advised investors to be “opportunistic on a pullback in the shares” of Zillow.

Chris Goodney/Bloomberg


shares hit a record high Thursday morning as a trio of analysts lifted their price targets for the online real-estate firm, amid a booming housing market in many parts of the country. In particular, they are bullish on the company’s increasing focus on buying, repairing and reselling houses—the so-called iBuyer market.

That market has attracted new attention after Zillow rival Opendoor announced plans to go public via a reverse merger into a SPAC, or special purpose acquisition company. The terms of the deal have spurred analysts and investors to reassess their views on Zillow’s growing role in that market—and they see an expanding business that might be undervalued.

Truist analyst Naved Khan repeated his Buy rating on Zillow shares (ticker: Z), upping his price target on the stock to $115 from $108. Khan said a side-by-side comparison of the Zillow and Opendoor iBuyer businesses “points to significant room for margin improvement” for both Zillow’s Homes segment and its mortgage business. He said gross margins in Zillow’s iBuyer business should improve, as repair costs for purchased homes come down “with scale and analytics.”

Deutsche Bank’s Lloyd Walmsley likewise repeated his Buy rating on Zillow, while raising his target price to $140 from $115, citing the expected valuation of the Opendoor transaction as evidence that Zillow’s home-flipping business is undervalued. Walmsley said he now values the Zillow Homes business at about $49 a share, up from $25 a share previously. The analyst said Zillow’s valuation can “re-rate higher,” driven by the additional focus on the iBuying segment from the Opendoor listing, continued strength in the housing market, and growth in the company’s mortgage business, among other factors.

Jefferies analyst Brent

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