According to Bank of America Merril Lynch, Zillow’s move into mortgage lending may hurt its profitability next year.
The firm lowered its rating on the online real estate company’s shares to neutral from buy, citing increasing concerns over its business model shift.
Zillow shares plunged 16 percent Tuesday, a day after it reported second-quarter revenue of $325 million, just shy of consensus estimates of $326 million, according to Thomson Reuters. The company announced plans to acquire Mortgage Lenders of America, a national mortgage lender.
The integration of that business poses a risk for 2019 results at a time when Zillow is already under pressure, analyst Nat Schindler said in a note to clients. “The quarter revealed challenges for multiple business segments that limit our optimism on FY19 upside,” he said.
Schindler lowered his price target to $60 from $70 for Zillow shares, representing 2 percent upside to Monday’s close.
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