What Happened?
Shares of online real estate marketplace Zillow (NASDAQ:ZG) fell 3.4% in the afternoon session after Wells Fargo lowered its price target on the company's stock to $31. According to Streetinsider, analyst Alec Brondolo cut the target to $31 from $35 and kept an Equal Weight rating. He is lowering estimates because of a weaker macro backdrop. He said those estimate cuts are likely already expected, but challenging strategic developments make it hard to call a bottom in the valuation multiple.
The shares closed the day at $28.69, down 4% from the previous close.
The stock market overreacts to news, and big price drops can present good opportunities to buy high-quality stocks. Is now the time to buy Zillow? Access our full analysis report here, it’s free.
What Is The Market Telling Us
Zillow’s shares are very volatile and have had 23 moves greater than 5% over the last year. In that context, today’s move indicates the market considers this news meaningful but not something that would fundamentally change its perception of the business.
The biggest move we wrote about over the last year was 8 months ago when the stock dropped 15.1% on the news that the company reported mixed fourth-quarter results that left investors concerned despite beating on the top and bottom lines. While the online real estate marketplace's revenue of $654 million and its GAAP profit of $0.01 per share both topped Wall Street's expectations, other key metrics pointed to underlying weakness. The company's adjusted EBITDA, a measure of operational profitability, came in at $149 million, slightly missing the consensus estimate of $151.5 million. Furthermore, Zillow's free cash flow margin saw a sharp decline, falling to 6.7% from 15.9% in the same quarter last year, raising concerns about its cash generation efficiency. This combination of a slight miss on adjusted EBITDA and a significant drop in cash profitability appeared to outweigh the headline beats, driving negative investor sentiment.
Zillow is down 56.3% since the beginning of the year, and at $28.69 per share, it is trading 61.5% below its 52-week high of $74.58 from October 2025. Investors who bought $1,000 worth of Zillow’s shares 5 years ago would now be looking at only $312.10.
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