September 29, 2017

Valens Research Weekly Equity Idea Highlight for September 27, 2017 – Zillow Group, Inc.

This week the Valens Securities team highlights our most interesting equity insight from across our tools and our analysis.

Pessimistic market outlook for growth and ROA’, controlling market position with huge addressable market opportunities and management confidence about their strategy spell equity upside

Current market expectations for ZG are overly pessimistic. While UAFRS adjusted ROA’ has improved materially since they acquired Trulia and took out their largest competitor, the market is expecting ROA’ to decline back to the lower end of historical levels. Also, while ZG is now the largest player in their space, they still only see a fraction of the total revenue from the real estate market, meaning expectations for Asset’ growth to trend to the low end of historical levels appears overly pessimistic. Considering low market expectations and the company’s historical performance and growth opportunities, there appears to be equity upside potential.

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