BofA Securities has raised its outlook on Zillow Group (NASDAQ: NASDAQ:ZG), increasing the price target to $71.00 from the previous $54.00, while keeping a Neutral rating on the stock.
The adjustment comes ahead of Zillow's third-quarter 2024 earnings report, which is scheduled for November 6.
The analyst from BofA Securities anticipates that Zillow will surpass third-quarter revenue and EBITDA (earnings before interest, taxes, depreciation, and amortization) expectations, projecting figures of $557 million and $106 million respectively.
These estimates slightly edge out the consensus, which stands at $556 million in revenue and $108 million in EBITDA. The firm's positive outlook is based on Zillow's consistent conservative guidance and the company's efforts in expanding growth initiatives.
Recent data on mortgage purchase applications indicates a 7% increase in volumes between September 20 and October 11, suggesting a potential rise for the fourth quarter. However, the analyst also notes the possibility of a downturn later in the quarter due to interest rate increases of 50 basis points since the Federal Reserve initiated rate cuts.
Despite this, BofA Securities foresees a more optimistic scenario for 2025, with a projected 9.5% increase in volume compared to a 1.8% year-over-year decline in 2024.
For the fourth quarter of 2024, BofA Securities expects Zillow to report revenue and EBITDA of $534 million and $102 million, respectively. These figures are in line with market expectations, which forecast $533 million in revenue and $103 million in EBITDA, assuming a 1% year-over-year acceleration in transaction volume growth to 1.4%.
In other recent news, Zillow Group has been the focus of several key financial developments. The company reported strong Q2 2024 results, with revenues reaching $572 million, a 13% increase year-over-year, primarily driven by the rental and mortgage sectors. Zillow also redeemed all outstanding 1.375% Convertible Senior Notes due 2026, totaling $498.8 million in principal, as part of its strategy to manage debt ahead of schedule.
Analysts have weighed in on Zillow's financial performance and growth prospects. Citi reaffirmed its Buy rating on Zillow, maintaining a $62 price target, based on the success of Zillow Showcase Listings and the potential for revenue growth from new products. Jefferies also maintained a Buy rating and raised the price target to $80, citing expected recovery in Housing Transaction Value and the potential for increased revenue from new products.
DA Davidson raised Zillow's stock price target to $71, maintaining a Buy rating due to the success of Zillow's Listing Showcase offering, while Cantor Fitzgerald initiated coverage with a Neutral rating, citing potential for a boost in the company's fundamentals due to an anticipated recovery in the real estate market.
InvestingPro Insights
Zillow Group's financial landscape offers some intriguing insights that complement BofA Securities' analysis. According to InvestingPro data, Zillow's market capitalization stands at $14.37 billion, reflecting its significant presence in the real estate technology sector. The company's revenue for the last twelve months as of Q2 2024 reached $2.071 billion, with a notable revenue growth of 13.04% in Q2 2024 compared to the previous year. This aligns with BofA's expectations of Zillow surpassing revenue estimates in the upcoming earnings report.
InvestingPro Tips highlight that Zillow's management has been aggressively buying back shares, which could be seen as a sign of confidence in the company's future prospects. Additionally, the tip that Zillow holds more cash than debt on its balance sheet suggests a strong financial position, potentially providing flexibility for growth initiatives mentioned in the article.
It's worth noting that InvestingPro offers 11 additional tips for Zillow Group, providing a more comprehensive analysis for investors seeking deeper insights into the company's financial health and market position.
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