Despite a tough housing market, Zillow can rally nearly 20%, says JPMorgan

According to JPMorgan, it's time for investors to join the Zillow train.

‍

With an overweight rating and a $48 per share price target, analyst Dae Lee started covering the online real estate marketplace. According to that forecast, the Friday close of $40.50 might rise by almost 20%.

‍

We think Zillow is in the best position to navigate the [near-term] real estate industry challenges and come out stronger on the other side thanks to its leadership as the most popular online real estate platform, core demand generation-based business model, solid margins (26% in '22), and active share repurchase program, Lee wrote in a note on Monday.

‍

Also, he continued, "Zillow has a strong balance sheet to continue investing through N-T headwinds, which should increase its leading position.

‍

According to the analyst, the company is still dealing with economic headwinds, and revenue is predicted to drop by 6% in the fiscal year 2023 before recovering.

‍

According to Lee, "the residential real estate business is cyclical, and it is currently in a negative cycle and confronts issues related to affordability, mortgage rate volatility, and low inventory."

‍

Zillow reported earlier this month that, while visitors decreased 5% from the same period last year, the average monthly unique users for the fourth quarter were unchanged year over year.

‍

We believe that the cycle is closer to the bottom and that the recovery will start later in 2023. "Visibility remains restricted with seller and buyer sentiment ebbing and flowing with mortgage rate fluctuations," the analyst said.

‍

Zillow's stock has increased by roughly 30% this year despite declining by 30% over the previous 12 months. In premarket trade on Monday, the stock fell 2.5%.