Benchmark has upgraded the price target for Zillow Group (NASDAQ: NASDAQ:ZG), raising it to $65.00 from the previous $60.00, while maintaining a Buy rating on the stock.
The adjustment comes after Zillow demonstrated a robust financial quarter, with stable rates and solid organic execution, which helped to clarify the company's earnings before interest, taxes, depreciation, and amortization (EBITDA) outlook.
The company's recent performance has been underappreciated in the real estate market, despite its status as a sector leader. Zillow's consistent growth and the development of its platform flywheel since its strategic pivot has been notable, yet the company often does not seem to receive due recognition. The firm's latest earnings report and guidance, however, have brought attention to these advancements.
Furthermore, the announcement of a CEO transition to an executive who has been instrumental in the company's platform improvements and acquisitions has marked a significant milestone. This change is expected to continue driving the company's progress.
Benchmark's analysis suggests that Zillow is making strides in increasing market penetration, conversion rates, and listings, particularly in the rentals and Showcase segments. These improvements are anticipated to significantly boost the company's monetization efforts in the near future.
Zillow Group reported a 13% year-over-year revenue increase, totaling $529 million, surpassing expectations. However, Zillow's second-quarter guidance fell below analyst expectations, largely due to a slowdown in first-time homebuyer activity and a cautious approach from Premier Agent partners following a recent interest rate increase.
Analysts' views on Zillow vary. DA Davidson maintains a positive outlook, attributing it to the growth of Zillow's Listing Showcase feature and an increase in paying listing agents. Piper Sandler reiterated its Overweight rating, citing strong revenue growth in Zillow's Flex (NASDAQ:FLEX) program and strategic board member investments.
In contrast, Barclays (LON:BARC) reaffirmed its Underweight rating, pointing to growing user engagement with competitor Homes.com's platform. Citi, on the other hand, maintained a Buy rating, highlighting the potential growth from Zillow's latest offerings, including Enhanced Markets and Showcase Listings.
InvestingPro Insights
In light of Benchmark's optimistic outlook on Zillow Group (NASDAQ:ZG), it's worth noting that Zillow's management has been actively buying back shares, signaling confidence in the company's future (InvestingPro Tip). Additionally, Zillow holds more cash than debt on its balance sheet, which provides financial flexibility and resilience (InvestingPro Tip). These strategic moves are particularly relevant given the company's recent performance and Benchmark's upgraded price target.
From a data perspective, Zillow's market capitalization stands at $11.11 billion, reflecting the scale of its operations within the real estate sector. Despite not being profitable over the last twelve months, the company has a strong gross profit margin of 77.46%, underscoring the efficiency of its core business (InvestingPro Data). Analysts predict the company will be profitable this year, which aligns with Benchmark's positive sentiment and could be a catalyst for future stock price appreciation (InvestingPro Tip).
For readers interested in a deeper dive, there are additional InvestingPro Tips available that provide further insights into Zillow's financial health and stock performance. Visit https://www.investing.com/pro/ZG for a comprehensive analysis.
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