Zillow Group (ZG) faces a widening split between top-performing agents and those struggling to keep pace, RBC Capital Markets said Monday in a report.
RBC found that Zillow's lead-distribution system is increasingly favoring larger, more experienced teams, with buyer activity flat to slightly down overall while flowing disproportionately to the strongest agents. That dynamic is helping high-volume agents, particularly those using Zillow Home Loans, where preapproval activity and lead conversion remain solid, the report said.
Some agents continue to fall short of Zillow Home Loans' preapproval benchmarks, a miss that hurts lead quality and can jeopardize their Flex or Preferred status, the report said. Those pressures are creating "meaningful" resistance among parts of the agent base, RBC said.
Zillow's strategy, while technically working, still doesn't fit the needs or operating style of certain agents and clients, RBC said. Industry shifts, including more private listings and evolving rules for multiple listing services, don't appear likely to materially change Zillow's competitive position, the report said.
Q2 guidance is expected to land in line with or slightly below consensus "given macro headwinds, the report said. RBC trimmed its Q2 EBITDA forecast and left H2 expectations intact.
RBC rates Zillow stock outperform with a price target of $95. Q1 results are due May 6.
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