Zillow's 51% Slide Leaves Room for $70-If AI Fears Lose Their Overhang

RBC lowered the multiple, not the business case

RBC still rates ZG Outperform, but it cut its price target to $70 from $95. With ZG trading near $35.83, just above its $34.50 52-week low after a 51% six-month slide, the move looks less like a business collapse and more like a lower valuation ceiling. The bull case still rests on Zillow growing faster than the housing market. The bear case says investors will pay only a thinner multiple while AI concerns hang over the stock.

RBC still says Zillow's enhanced market strategy is delivering visible, durable faster-than-market growth, and it still sees likely enhanced-market organic acceleration into 2026. What changed is the multiple investors are willing to apply while they weigh the risk that large language model innovation and Google could limit how much of that growth gets capitalized today.

The bull case depends on share gains, not a hot housing market

The main support for the stock is no longer a return to peak housing traffic. It is Zillow's ability to keep winning more advertising spending in the markets where the enhanced model is taking hold. RBC's operating check is straightforward: the enhanced market strategy continuing to drive faster-than-market growth remains the condition that supports a premium multiple.

Estimate mix: acceleration, then a slower test

Current 2026 expectations imply likely enhanced-market organic acceleration, which is the clearest near-term support for the bull case. The harder check comes in 2027, where estimates may show modest deceleration. Even so, consistent market-share gain assumptions could still mean modest acceleration for core Premier Agent in 2027, and RBC thinks the percentage of actively enhanced market share-gaining markets could nearly triple by 2028. The core engine is not more housing volume by itself; it is more marketing spend shifting through Zillow's product in the markets where it is working.

The Realtor.com partnership tests how defensible the choke point is

The clearest outside check is the May Realtor.com partnership to expand pre-market Preview listings. If early listing access makes Zillow more useful to buyers, that can strengthen the platform. But if similar access becomes standard across competitors, Zillow may look less like a rare choke point and more like one useful node in the buyer journey.

AI and search still cap how much investors will pay

The operating story may be improving, but the market is still debating the ceiling on the stock. The Street's average 12-month price target is $53.21, with a high of $70.00 and a low of $38.00. That range captures the real debate: investors do not need Zillow to fail, but they may still cap the multiple if AI and search limit the uniqueness of the distribution channel.

RBC's concern is about valuation regime, not just one quarter: large language model product innovation and Google could remain an overhang for digital marketplaces. If consumers increasingly get complete answers through search or AI assistants, Zillow can still make money but command a lower multiple because the front door looks less exclusive.

What to watch before calling ZG a bargain

The Street's $38.00 low to $70.00 high forecast range shows where the fight is. Bulls still see room for premium growth. Bears think AI and search keep the multiple pinned.

Scorecard

What would support the higher end - Estimates start to reflect improvement rather than damage control, with likely enhanced market organic acceleration holding up. - The stock begins trading closer to the top of analyst expectations, signaling that investors will pay for durability again.

Catalysts that matter now - Upcoming earnings can confirm or question the growth trajectory. - Any update on large language model product innovation and Google could move the AI overhang one way or the other. - How the Preview listings partnership evolves may change how much control Zillow has over the most useful parts of the buyer journey.

What would weaken the thesis - If the low end of the Street range starts looking more realistic than the high end, the stock may still be catching a falling multiple. - If the enhanced market strategy continuing to drive faster-than-market growth stops being the anchor of the bull case, the premium multiple likely stays capped.