Bob Peck's 7 Points On Zillow And Trulia

SunTrust analyst Robert S. Peck commented on Zillow Inc (NASDAQ: Z) Tuesday following its Q4 results and amid its merger with Trulia Inc (NYSE: TRLA).

Here are Peck's seven points:

"Zillow + Trulia merger efforts can now begin." Peck expected 2015 to be a "year of integration" and looked "forward to greater detail from the companies."

1. The "merger with Trulia set to close as early as Feb 17th, with [a] conference call to discuss the preliminary stages of integration on Feb 18th at 9AM EST." Peck anticipated that "formal pro-forma filings will come at a later date."
2. Zillow's Q4 "results beat estimates for revenues but trailed on EBITDA."
3. "Ahead of the April 7th contract end with ListHub, zPro Brokers now exceed 5K and Zillow continues to sign MLS agreements (recently signing 2 of the 3 largest) – strong progress, work remains."
4. "Agent subscribers only grew by ~1.4K q/q, while ARPA grew 32 percent" YoY. Same Agent Spend increased 59 percent YoY versus 64 percent in Q3, however, Peck noted that Q3 and Q4 "benefited from the increased inventory sell through."
5. "Consumer Loan Requests accelerated to ~7.4M, +5 percent q/q vs. -24 percent in 4Q’13, helping mortgages outperform. New pre-approval product and presence of national brands like Bank of America and Citi likely drove results."
6. "Display continued to be weak, up only 13 percent y/y vs. 23 percent in 3Q – on a tougher comp. Display came in below guidance despite 41 percent y/y growth in UVs (Mobile +57 percent). This was likely a factor in the lower than expected EBITDA."

Positives from Q4 included marketplace revenue growth of 71 percent and while APRA was up 32 percent. The company also reported more than 1 million agent ratings which shows “strong progress towards enabling greater agent discovery on the site,” said Peck.

Looking ahead, Peck felt it was important to track technology and development spending and noted increased G&A spending in Q4. The analyst also expected “more color on ad spend following the merger.”

Peck also highlighted that the competitive landscape is changing and may become more challenging following the acquisition of Move by News Corp (NASDAQ: NWSA).

The firm maintained a Neutral rating and $115 price target on Zillow. SunTrust estimated Revenue / EBITDA / EPS for FY2015 and FY2016 at $464M/$94M/$1.13 and $606M/$157M/$2.20.

Zillow Inc recently traded at $111.75, up 4.93 percent.

Trulia Inc recently traded at $49.76, up 6.12 percent.