Sector Snap: Online Real Estate Companies Fall

Shares of two operators of real estate websites fell Monday after RBC analysts downgraded Trulia Inc. and Zillow Inc. said it will sell stock and acquire New York competitor StreetEasy.

RBC Capital Markets downgraded Trulia’s stock rating to “Sector Perform” from “Outperform” after the stock’s big price gains this year. In a note to clients, analysts Mark Mahaney and Andre Sequin said that Trulia faces tough competition from Zillow and Realtor.com.

Still, the analysts remained upbeat on the growth potential of online real estate companies. “We continue to view Zillow as the leader in the space,” said Mahaney and Sequin, with Trulia “as a fast-follower.”

Shares of San Francisco-based Trulia fell $2.44, or 5.3 percent, to close at $43.66 Monday. Even counting Monday’s drop, Trulia shares have nearly tripled in 2013 amid a recovery in the housing market.

Meanwhile, Zillow shares fell $6.48, or 7.1 percent, to $84.74 Monday. Its shares have also tripled this year.

Zillow plans to sell 2.5 million shares. Some of the company’s big shareholders also plan to sell a total of 2.5 million shares. Sellers include co-founders and directors Richard Barton and Lloyd Frink.

News of stock offerings tends to send share prices down. Issuing new stock lessens the value of shareholders’ existing stakes.

The Seattle-based company on Monday also announced that it plans to buy New York City-focused online real estate company StreetEasy for $50 million.