In a Changing Legal Environment, Look for the Beneficiary

Laws change all the time. And lawsuits may not change laws, but they can impact how they’re interpreted. When there’s a big change, some groups stand to profit, while others stand to see a loss.

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  • Recently, a lawsuit and settlement changed how real estate listings would be handled by real estate agents. That could drive down the commission costs for buying and selling a home. But it could also mean that another group may profit.

    That group is real estate websites geared towards homeowners, not professional agents. Among them is Zillow (Z).

    The company had its rating reiterated by analysts, who see the home data and listing site as likely to continue performing well even with the recent real estate lawsuit.

    Zillow has been a poorly performing company over the last year. Revenues rose by 9%, but the company remained unprofitable. Still, thanks to the strong bull market, shares are up 12%.

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  • If Zillow can benefit from a slowdown in other parts of the real estate market, it may flip a profit later in the year. That could help shares soar higher.

    Action to take: Speculative investors may like shares now. The stock dipped on the lawsuit news, but could be on track to rebound in the coming weeks and months.

    For traders, the August $60 calls, last trading for about $2.60, could see mid-double-digit returns or better in the months ahead.


    Disclosure: The author of this article has no position in the company mentioned here, but may trade after the next 72 hours. The author receives no compensation from any company mentioned in this article.

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