Zillow Group (Z) saw its shares surge 5.06% during intraday trading on Friday, as investors react positively to developments in the company's ongoing legal dispute with Compass. The case, currently being heard in a Manhattan federal court, has the potential to reshape the U.S. residential real estate market and could further solidify Zillow's dominant position in the online real estate marketplace.

At the heart of the dispute is Zillow's policy requiring agents to list homes on the multiple listing service (MLS) within a day of public marketing. This policy conflicts with Compass's "Private Exclusives" strategy, which allows sellers to restrict their listings to Compass agents and clients before appearing on the MLS. Compass has sued Zillow, claiming the latter's policy is anticompetitive and harmful to its business model. However, investors seem to be betting on a favorable outcome for Zillow, which could reinforce its market-leading position.

The significance of this legal battle cannot be overstated, given Zillow's substantial market presence. The company estimates that at least one of its products is used by agents in approximately 80% of U.S. home transactions. Gordon Haskett analyst Robert Mollins maintains a Buy rating on Zillow with an $87 price target, stating, "We see a favorable risk/reward as we believe investor concerns around competitive encroachment and legal risks are overstated." This optimism, coupled with Zillow's strong market position, appears to be driving the stock's upward movement as investors anticipate a potential strengthening of Zillow's competitive advantage in the real estate technology sector.