On Thursday, Cantor Fitzgerald initiated coverage on shares of Zillow Group (NASDAQ:ZG) with a Neutral rating and a price target of $47.00. The firm noted that Zillow's fundamentals could see a boost from an anticipated recovery in the real estate market in the coming quarters, as mortgage rates are expected to decline. The company's product pipeline was described as "intriguing," with many initiatives still in the early stages, which could lead to positive revisions shortly.
The analyst also pointed out that while there is potential for near-term gains, it remains uncertain whether Zillow has established a robust product foundation to sustain above-market growth over an extended period. Questions persist regarding real estate industry commission levels and the impact of operational changes stemming from the National Association of Realtors (NAR) settlement, which have recently been implemented.
From a valuation perspective, Zillow's shares are currently trading at a forward FY25 Enterprise Value to Projected EBITDA (EV/PF EBITDA) multiple of 19 times. This valuation is considered a premium compared to the long-term trading multiples of other cyclical real estate stocks. The new price target of $47 reflects this valuation assessment.
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