Wednesday - DA Davidson analysts have increased the price target on shares of Zillow Group (NASDAQ:ZG) shares from $75.00 to $80.00, while maintaining a Buy rating. The adjustment follows Zillow's Showcase Listing (SL) service's continued expansion in market share among available for-sale home listings throughout the fourth quarter.
With a market capitalization of $16.8 billion and an impressive six-month return of ~54%, Zillow has shown strong momentum. Additionally, Zillow reported growth in its base of paying customers quarter over quarter. According to InvestingPro, the company maintains robust financial health with a current ratio of 3.13, indicating strong liquidity.
The Showcase Listing offering has been a key focus for Zillow, as it seeks to increase its presence in the real estate market. Although early customer retention rates for the service present a mixed picture, DA Davidson analysts are optimistic about Zillow's prospects.
They cite the momentum of SL penetration and the expectation of further market share gains in Zillow's Residential and Mortgage segments as reasons for the revised estimates and price target increase. The company's strong revenue growth of 13.12% and impressive gross profit margin of 76.44% support this optimistic outlook.
The analysts' confidence is further supported by the broader industry's total transaction value growth, which was approximately 10% year-over-year for October and November. This industry trend aligns with the positive trajectory observed for Zillow's SL offering.
Since December 2023, DA Davidson has monitored the presence of Showcase Listings within Zillow.com search results across 29 of the largest U.S. real estate markets. This observation has contributed to the analysts' assessment of Zillow's expanding market influence and the subsequent price target revision.
The new price target implies a 28.5x projected '25 enterprise value to EBITDA ratio for Zillow Group, indicating DA Davidson's bullish outlook on the company's financial performance and market positioning.
Analyst targets currently range from $50 to $105, reflecting diverse market opinions. For deeper insights into Zillow's valuation and growth prospects, InvestingPro subscribers can access comprehensive analysis and 8 additional ProTips in our detailed research report, part of our coverage of 1,400+ US stocks.
In other recent news, Zillow Group has been the focus of various analyst updates and strategic initiatives. RBC Capital Markets and Piper Sandler maintained optimistic ratings on the company, with RBC raising its price target to $88 and Piper Sandler to $93, indicating confidence in Zillow's position in the digital real estate sector. Canaccord Genuity also lifted its price target to $86, following Zillow's strong Q3 results.
Zillow's third-quarter performance showcased a 17% year-over-year revenue increase, reaching $581 million, primarily driven by a 63% surge in mortgage revenue, which totaled $39 million.
Despite a net loss of $20 million, the company demonstrated effective cost management, with an EBITDA of $127 million. For the fourth quarter, Zillow projects a 12% year-over-year increase in revenue, anticipating earnings between $525 million and $540 million.
In terms of corporate structure, Zillow announced the promotion of Jun Choo to Chief Operating Officer, overseeing Zillow's for-sale business strategy and operations. This executive shift follows the departure of Susan Daimler (OTC:MBGAF) and Matt Daimler, president of Zillow and senior vice president of product, respectively.
Moreover, Zillow has been active in strategic initiatives to enhance its market presence. The company completed the redemption of its 1.375% Convertible Senior Notes due in 2026, issuing approximately 4.53 million shares of Class C capital stock to noteholders.
Other developments include the acquisition of Virtual Staging AI and the expansion of its partnership with Realtor.com. These are recent developments and are part of Zillow's ongoing efforts to refine its services and cater to the evolving needs of its users.
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