Investing.com -- William Blair initiated coverage of Zillow Group Inc (NASDAQ:ZG). with a Market Perform rating, citing the company’s dominant position in online home search but warning of growing industry risks and rising competitive pressure.

“Zillow is the clear leader among home search portals in visitor traffic,” analysts wrote, noting that its traffic share exceeds the next three competitors combined, with 80% of its traffic coming from organic or direct sources, a major competitive advantage.

While Zillow should benefit from a potential housing market recovery, William Blair flagged several challenges, including heightened competition from CoStar’s Homes.com and possible margin pressures if spending rises to defend market share.

The firm also highlighted risks from industry rule changes that could reduce buyer-side commissions, a key revenue stream for Zillow.

The analysts noted Zillow’s efforts to build a comprehensive “Super App” for real estate transactions, spanning services from tours to mortgages and moving, but said integrating with numerous third parties could prove complex.

Zillow may need to spend more to maintain its competitive positioning, limiting margin expansion, the note said, adding that changes to industry commission structures and listing access rules could also weigh on future performance.

William Blair values Zillow at 8 times 2025 gross profit, 25 times adjusted EBITDA, and 33 times free cash flow.

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