The investment firm wrote a research note in which it said that the company is one of two “online real estate stocks” that still have to contend with the real-world housing backdrop, which includes tight supply, rising prices and a difficult mortgage lending environment in which credit is still tight, even as rates are rising.
“While Zillow has successfully consolidated much of the real estate category online, through its own organic growth and purchases of companies like Trulia and StreetEasy, we are beginning to see signs of refragmentation,” the analysts wrote. “As we noted in the first edition of our Venture Capital Horizons series, real estate tech has been one of the fastest growing verticals in terms of attracting VC investment.”
Zillow recently launched its own “iBuyer” initiative, a move that Goldman deemed “necessary.” Nevertheless, the company is still dealing with companies who have developed their entire business model around this idea, which allows consumers to buy homes directly from owners in a less time-consuming and less effort-intensive selling process than going through a broker on the open market.
The company’s shares are up 59% in 2018 and these may come under pressure in the second half as online real estate stocks often slow down during the second half of the year as “selling season” ends.
ZG stock fell about 1.4% during regular trading hours and a further 1.3% after the bell Monday on the downgrade.