Investing.com — Jefferies analyst John Colantuoni stated in a note to clients on Tuesday that the recent selloff in one company’s shares presents an attractive buying opportunity, calling the pullback an “easy flip” after what it views as an overdone market reaction.
Zillow is the stock in question. Jefferies said it “recommend[s] buying Z after shares traded down ~8% today on news of GOOGL testing sponsored home listings in search results.”
The brokerage argued that Zillow is “relatively insulated” from Alphabet’s move, citing several structural advantages.
Colantuoni explained that buyer-agent advertising “requires a large sales force,” while about “~80% of Z’s traffic is direct/app.”
The analyst also noted that Google’s listings “may violate MLS rules,” adding another potential constraint on the rollout.
Furthermore, Jefferies believes that Google’s new product is “more likely to compete with Z’s Showcase/loan offerings,” which it estimates represent “just 7%/6% of total valuation.”
Google reportedly began testing sponsored home listings last week, with the feature live on mobile web browsers in select markets.
While the development is “immaterial today,” Jefferies said it is “worth watching,” given Google’s scale and history of product experimentation.
“GOOGL’s initial offering appears unlikely to compete with Z’s core Premier Agent offering,” Colantuoni remarked, pointing to the limited scope of the test and the fact that generating buyer-agent leads requires “a large sales force, an investment GOOGL has repeatedly resisted.”
As a result, the analyst feels the stock reaction “appears overblown.”
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