Zillow: If You Can Win In This Real Estate Market…

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Forbes.com, Winter, 2011. This article was placed on behalf of the U.S. based equity research effort of institutional broker and investment bank Canaccord Genuity. It was part of a series of articles developed under an agreement with forbes.com to work with a variety of contributors and assist them in delivering actionable investment ideas each week. The site, forbes.com is one of the top 500 sites in the world with nearly 10 million subscribers and approximately 100 million page views a month.

Canaccord Genuity Internet-Tech analyst Michael Graham initiated on Zillow (Z) with a BUY rating and $32 price target. In his initial note to investors, Mr. Graham said:
Image representing Zillow as depicted in Crunc…

“We believe Zillow is early in attacking a large market [including real estate brokerage fees, home rentals, home financing, and Internet advertising], and that its user base and database create barriers that hinder encroachment from Google and other large competitors.”

He added, “Zillow’s financial model has several points of positive leverage potential from increased pricing power and monetization of its traffic (and this is in a VERY weak real estate market). In addition, Zillow’s brand creates a lot of ‘pull’ in the market, reducing the required marketing spend.”

Notably, he went on to say that Zillow could be an attractive acquisition target for a company with a vast audience but little real estate expertise.