What Happened?
Shares of online real estate marketplace Zillow (NASDAQ: ZG) fell 6.4% in the afternoon session after news broke of a nationwide class-action lawsuit filed against the company, accusing it of deceptive practices related to its agent referral program.
The lawsuit targeted Zillow's "Flex" agent program, claiming it misled potential homebuyers. According to the filings, the program allegedly steered customers to agents affiliated with Zillow rather than the agent who originally listed the property. The suit asserted that Zillow took a hidden commission cut of up to 40% from its agents on successful transactions, a fee that was not disclosed to the buyer or seller. Plaintiffs argued these practices inflated home purchase prices and violated consumer protection laws. The legal action sought billions of dollars in damages, creating significant regulatory and reputational risks for the online real estate giant.
The shares closed the day at $78.18, down 6.6% from previous close.
The stock market overreacts to news, and big price drops can present good opportunities to buy high-quality stocks. Is now the time to buy Zillow? Access our full analysis report here, it’s free.
What Is The Market Telling Us
Zillow’s shares are somewhat volatile and have had 11 moves greater than 5% over the last year. In that context, today’s move indicates the market considers this news meaningful but not something that would fundamentally change its perception of the business.
The previous big move we wrote about was 5 days ago when the stock gained 3.5% on the news that Bernstein upgraded the stock to 'Outperform' from 'Market Perform' and significantly raised its price target.
Analyst Nikhil Devnani boosted the price target to $105 from a previous $75. The upgrade reflected strong confidence in the company's outlook, as the firm cited expectations for mid-teens revenue growth and contributions from new business segments as key factors. This wave of optimism helped push the stock to a new 52-week high, underscoring positive investor sentiment surrounding Zillow's strategic direction.
Zillow is up 11.9% since the beginning of the year, but at $78.42 per share, it is still trading 9.6% below its 52-week high of $86.76 from September 2025. Investors who bought $1,000 worth of Zillow’s shares 5 years ago would now be looking at an investment worth $795.33.
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