Zillow Group's stock experienced a significant pre-market plunge of 5.23% on Thursday, extending losses from the previous after-hours session. The decline comes despite the company reporting first-quarter results that exceeded Wall Street expectations.

The sharp sell-off appears to be driven by multiple factors, including JP Morgan cutting its price target on Zillow from $84 to $76. Additionally, while Zillow posted Q1 adjusted earnings of $0.53 per share, beating the $0.46 consensus estimate, and revenue of $708 million, slightly ahead of expectations, investors focused on concerning underlying metrics.

Zillow reported a 3% decline in traffic to its sites and apps, with average monthly unique users falling to 220 million. More importantly, the company issued second-quarter adjusted EBITDA guidance in the range of $150 million to $165 million, significantly below the consensus estimate of approximately $190 million. CEO Jeremy Wacksman also highlighted ongoing housing affordability pressures, noting "very modest gains in transaction volumes" as macroeconomic uncertainty keeps buyers on the sidelines.