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Trulia (TRLA) Downgraded To 'Hold' By Deutsche Bank On Valuation

 February 19, 2013 03:17 PM


(By Balaseshan) Deutsche Bank analyst Lloyd Walmsley downgraded rating of Trulia Inc. (NYSE: TRLA) to "Hold" from "Buy" on valuation, while increasing price target to $34 from $30.

Walmsley downgraded Trulia shares as the current stock price exceeds his upwardly revised price target. In his view, current valuation levels appear full.

The company has been executing well, and he continues to see meaningful upside to the analyst's estimates given the size of the real estate advertising end market at $24 billion and tailwinds from the real estate recovery. He would be more bullish on any pullback under $30/share.

[Related -Zillow Inc. (Z) Q2 Earnings Preview: Data Suggest Bullish Revenue Surprise]

The analyst continues to be bullish on Trulia's opportunity, as the company continues to grow audience rapidly and remains well positioned to benefit as real estate ad dollars follow users online and to mobile.

Real estate advertising in print has fallen from $11.2 billion to $4.5 billion from 2010 to 2012 (per Borrell), and there continues to be a large opportunity for Trulia to attract those dollars and further shifts from away from print to online/mobile, Walmsley noted.

The analyst sees his current estimates as conservative, with revenue growth decelerating from 77% year-over-year in 2012 to 50% in 2013 and 39% in 2014.

In a more bullish scenario, were revenue growth to come in at 56% in 2013 and 48% in 2014, and assuming similar EBITDA margins to Walmsley's current estimates, he could get to a valuation of $39 per share (about 10% upside from here).

[Related -Trulia Inc (TRLA) Q3 Earnings Preview: A Tough Sell]

This analysis excludes any benefit from mortgage leads in 2014 (not currently in the analyst's model) which contributed almost $6 million in revenue to Zillow Inc. (NASDAQ: Z) in 2011.

TRLA is trading down 8.60% at $32.31 on Tuesday.

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