11:53 AM EDT, 10/06/2025 (MT Newswires) -- Zillow Group ( ZG ) (Z, ZG) is facing a tough environment amid housing market uncertainty and competitive pressures, Oppenheimer said in a client note on Monday.

The brokerage initiated coverage of the online real estate platform company with a perform rating.

Zillow's ( ZG ) shares trade at a 26% premium to peers, in terms of valuation based on earnings before interest, taxes, depreciation and amortization, Oppenheimer analysts Chad Larkin and Jason Helfstein said

Residential revenue would need to grow mid-to-high-teens next year to justify that valuation, though that's only possible in case of a strong housing market upturn, Larkin and Helfstein said.

"Despite the company making the right strategic decisions, investors are overly bullish on a 2026 housing recovery and long-term rentals growth," the analysts said.

Despite the Federal Reserve's pivot to lower interest rates, buyer affordability remains a concern as mortgage rates must fall about 300 basis points from today's 6.3% rate to offset 50% home price growth since 2019, Larkin and Helfstein said.

The Fed last month delivered a widely-expected interest rate cut and signaled further policy easing as it acknowledged increased downside risks to employment.

At the same time, investors are under-appreciating threats from the changes to the Clear Cooperation policy, which the National Association of Realtors announced in March, and the impact from a planned merger of Compass (COMP) and Anywhere Real Estate ( HOUS ) , the Oppenheimer analysts said.

"With the end of Clear Cooperation, Zillow ( ZG ) faces a real threat to its ability to populate listings on its websites," particularly after the Compass-Anywhere Real Estate deal, the analysts said. "Assuming the deal closes, the combined company would represent the majority of listings over ($750,000)."

Last month, Compass and Anywhere Real Estate ( HOUS ) agreed to an all-stock merger transaction, creating a company with an enterprise value of about $10 billion. They expect the transaction to complete in the second half of 2026.

Price: 74.74, Change: -2.05, Percent Change: -2.67