On Wednesday, Citi reaffirmed its Buy rating on Zillow Group (NASDAQ:ZG), maintaining a price target of $62.00. The firm's analysis, which includes data from the Citi Innovation Lab, observed a month-over-month increase of approximately 11% in Zillow Showcase Listings (ZSL) for September, totaling around 9,300 listings. The growth included about 3,800 new listings, marking a 7% rise from the previous month.
The firm's tracking covered ZSLs across 49 states and approximately 2,800 cities, with penetration rates reaching low double digits in Apollo Beach, Florida, and mid-single digits across various other markets. For the third quarter, the data indicated an addition of roughly 11,400 net new listings. Given an estimated average price of $500 per listing, this suggests an incremental revenue contribution of $5.7 million for the quarter.
Citi's commentary highlighted the positive trend in monthly adoption rates for ZSL, despite the challenges faced by the broader real estate market. The firm expressed optimism about Zillow's positioning to capitalize on improvements in the housing sector and the growth of new products. These include the expansion of Enhanced Markets, expected to reach 43 by the year's end, Real-Time Touring, Zillow Showcase Listings, and its Rentals platform.
The reaffirmation of the Buy rating and the $62 price target reflects Citi's confidence in Zillow's potential for growth and its ability to adapt to and benefit from the evolving real estate landscape.
In other recent news, Zillow Group has taken significant steps to manage its financial obligations. The company recently announced its decision to redeem all outstanding 1.375% Convertible Senior Notes due 2026, totaling $498.8 million in principal. This move aligns with Zillow's strategy to address its debt ahead of schedule. In addition to this, Zillow completed an unregistered sale of equity securities, issuing nearly 2 million shares of its Class C capital stock and making cash payments of about $609.9 million.
On the performance front, Zillow reported strong Q2 2024 results, with revenues reaching $572 million, marking a 13% increase year-over-year, primarily driven by the rental and mortgage sectors. These recent developments have attracted the attention of several analysts. Jefferies maintained a Buy rating on Zillow and raised the price target to $80, citing expected recovery in Housing Transaction Value and the potential for increased revenue from new products.
Similarly, DA Davidson also maintained a Buy rating, raising the stock's price target to $71, influenced by the success of Zillow's Listing Showcase offering. Meanwhile, Cantor Fitzgerald initiated coverage on Zillow's shares with a Neutral rating.
InvestingPro Insights
Complementing Citi's optimistic outlook on Zillow Group (NASDAQ:ZG), recent InvestingPro data reveals some intriguing insights. The company's market capitalization stands at $13.6 billion, reflecting its significant presence in the real estate technology sector. Zillow's revenue for the last twelve months as of Q2 2024 reached $2.07 billion, with a notable revenue growth of 9.4% over the same period.
InvestingPro Tips highlight that Zillow holds more cash than debt on its balance sheet, which could provide financial flexibility as it continues to expand its product offerings like Enhanced Markets and Real-Time Touring. Additionally, net income is expected to grow this year, aligning with Citi's positive stance on the company's potential.
It's worth noting that Zillow's stock has shown strong performance recently, with a 15.02% return over the last month and a substantial 30.2% return over the last three months. This upward trend supports Citi's Buy rating and could be indicative of market confidence in Zillow's strategic initiatives.
For investors seeking a deeper understanding of Zillow's financial health and growth prospects, InvestingPro offers 12 additional tips, providing a comprehensive analysis to inform investment decisions.
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