On Monday, Zillow Group Inc . (NASDAQ:ZG) received an upgrade in its stock rating from a major financial firm. The company's stock was raised from Neutral to Outperform, accompanied by a significant increase in the price target to $80.00, up from the previous $50.00. This adjustment reflects the firm's heightened optimism about Zillow's business prospects.
The upgrade comes amid expectations of lower mortgage rates potentially benefiting Zillow's core brokerage operations. The financial firm also highlighted Zillow's software and services (S&S) initiatives as additional factors that may contribute to exceeding current financial estimates. The S&S revenues, which are included in the Residential revenue segment, are seen as a key driver for the company.
According to the firm, Zillow's S&S offerings, combined with its primary brokerage revenues, have contributed to the company's total revenue growth. This growth has been outpacing that of the national existing home market for several quarters. The firm's positive outlook is based on these internal growth strategies and external market conditions that could favor Zillow's business model.
The raised price target to $80 from $50 suggests a substantial upside from the current trading levels. This new target is indicative of the firm's confidence in Zillow's ability to capitalize on both its traditional real estate operations and its newer S&S ventures.
Investors and market watchers may see this upgrade as a sign of Zillow's strengthening position within the real estate sector. The company's stock performance in the coming quarters will likely be observed closely to see if it aligns with the firm's projections.
In other recent news, Zillow Group Inc. has been the subject of heightened attention following its Q2 revenue performance, which exceeded market expectations by reaching $572 million, a 13% increase year-over-year.
Susquehanna maintained its Neutral rating on Zillow Group but boosted the shares target to $55.00 from the previous $42.00, reflecting a more optimistic outlook for the company's future performance. The firm revised its revenue, EBITDA, and EPS forecasts for Zillow Group, citing the company's recent results and guidance.
Significant growth in the rentals and mortgage segments contributed to Zillow's robust performance, with Jeremy Wacksman appointed as the new CEO and Rich Barton assuming the role of Co-Executive Chair of the Board of Directors.
Zillow's Q3 residential revenue is projected to be between $375 million and $385 million, with total Q3 revenue anticipated to fall between $545 million and $560 million. The company's EBITDA for Q3 is expected to be between $95 million and $110 million.
In line with these recent developments, Zillow is targeting double-digit revenue growth in 2024, backed by its focus on digitizing the real estate process through its housing super app.
It's worth noting that the company's cash and investments decreased to $2.6 billion in Q2 from $2.9 billion in Q1 due to repurchasing convertible senior notes and shares. These developments highlight Zillow's commitment to growth and innovation in the real estate industry.
InvestingPro Insights
In light of the recent stock rating upgrade for Zillow Group Inc. (NASDAQ:ZG), InvestingPro data and tips offer additional insights into the company's performance and prospects. Zillow's management has been actively repurchasing shares, signaling confidence in the company's future (InvestingPro Tip #0). Moreover, the company holds more cash than debt, providing a solid financial foundation (InvestingPro Tip #1).
From a financial data standpoint, Zillow has experienced a significant return over the last week with a price total return of 10.47% (InvestingPro Data #1 Week Price Total Return). The company's stock is also trading near its 52-week high, currently at 97.73% of this peak value (InvestingPro Data #Price % of 52 Week High), reflecting the market's positive sentiment. Despite not being profitable over the last twelve months (InvestingPro Tip #7), analysts are predicting that the company will turn a profit this year (InvestingPro Tip #10).
Investors considering Zillow's stock will find additional InvestingPro Tips on the platform, which could further inform their decisions. There are 13 additional tips available for Zillow Group Inc. on https://www.investing.com/pro/ZG, offering a comprehensive analysis of the company's financial health and market performance.
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