Shares of Zillow Group, Inc. (Z) fell 9.5% on Monday after the online real estate marketplace company revealed that its Zillow Offers business will not sign any additional contracts to purchase new homes through the end of the year.
Zillow Offers provides services to homeowners to sell without having the burden of repairs or house showings. Zillow buys homes, prepares them for sale by doing the required work, and then lists them on the open market.
Zillow Offers suspended the new contracts as it intends to focus on existing customer contracts and current inventory that are yet to close and reduce its renovation pipeline. The company plans to market and sell existing homes through Zillow Offers during this period. (See Zillow Group stock charts on TipRanks)
Zillow CEO Jeremy Wacksman commented, “We’re operating within a labor- and supply-constrained economy inside a competitive real estate market, especially in the construction, renovation and closing spaces”.
He further added, “We have not been exempt from these market and capacity issues and we now have an operational backlog for renovations and closings.”
Last week, Morgan Stanley analyst Brian Nowak decreased the price target on Zillow to $112.00 (30.2% upside potential) from $153.00 and reiterated a Hold rating.
Overall, the stock has a Moderate Sell consensus rating based on 2 Holds and 1 Sell. The average Zillow Group price target of $118.50 implies 37.8% upside potential from current levels.
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