On Tuesday, BofA Securities adjusted its outlook on Zillow Group (NASDAQ:ZG), reducing the price target on the company's shares to $53 from the previous $56, while retaining a Neutral stance on the stock. The adjustment comes ahead of Zillow's expected first-quarter earnings release on May 1, 2024.
The firm anticipates that Zillow will surpass market expectations for the first quarter, projecting revenues and EBITDA of $516 million and $107 million respectively, which is higher than the consensus estimates of $507 million in revenue and $103 million in EBITDA. This forecast is supported by a noticeable increase in existing home volumes during February and March, with a year-over-year growth of 2% in the first quarter, contrary to Zillow's guidance which suggested a 1.5% decline.
The analyst from BofA Securities has revised the 2024 home sales volume forecast for Zillow upward to 4.17 million from the previous estimate of 4.11 million, reflecting a more optimistic view of the housing market. This revision is based on the improved home sales volume trends observed in the first quarter.
Furthermore, the firm expects Zillow to achieve a 4% year-over-year growth in total transaction volume, an uptick from the prior estimate of 2%. For the year 2024, the analyst projects that Zillow's residential revenues will outperform the broader real estate market by 6 percentage points, indicating a strong performance relative to the industry.
InvestingPro Insights
As Zillow Group (NASDAQ:ZG) gears up for its first-quarter earnings release, investors are closely monitoring the company's financial health and market performance. According to InvestingPro data, Zillow has a market capitalization of approximately $9.86 billion. Despite a challenging environment, the company exhibits a robust gross profit margin of 78.35% over the last twelve months as of Q1 2024, underscoring its ability to maintain profitability in its core operations. However, it's worth noting that the company's P/E ratio stands at -62.32, reflecting market concerns over its future earnings potential.
Amidst volatile market conditions, Zillow's stock price has experienced significant fluctuations, with a 22.25% decline over the last three months leading up to April 2024. This aligns with one of the InvestingPro Tips that highlights the stock's volatility and its poor performance over the past month. Nevertheless, management's aggressive share buybacks and the fact that the company holds more cash than debt on its balance sheet provide a silver lining for potential investors. Additionally, analysts predict that Zillow will become profitable this year, which could signal a turnaround for the stock.
For those considering a deeper dive into Zillow's financials and market prospects, InvestingPro offers a suite of additional tips—there are 11 more InvestingPro Tips available for Zillow Group. These insights can help investors make more informed decisions, especially when navigating the complexities of the real estate market. To access these tips and enhance your investment strategy, use the coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription.
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