Morgan Stanley raised the price target for Zillow Group (NASDAQ:Z) (NASDAQ:ZG) to $55 from $42 per share, maintaining an Equal Weight rating while also initiating coverage of Opendoor (NASDAQ:OPEN) with an Equal Weight rating and $4.25 price target.
Analysts told investors in a note that the U.S. housing market is showing signs of stabilization, but they expect a slow recovery with home prices remaining under pressure tactically.
"The US housing market is showing early signs of stabilization, as home prices grew 0.4% sequentially in 1Q:23 and housing inventory is no longer falling," analysts wrote. "As our global colleagues wrote this week in Navigating a Different Housing Cycle, this could point to a slow, volume-led but price-constrained recovery for the housing market from here."
"Ultimately, we expect home prices to remain weak, declining 2% in '24 before returning to growth in '25, whereas we expect the volume of home sales to recover faster, returning to ~1% growth annually beginning in '24."
While the firm maintains a balanced view of the sector, it sees a "clear road map" for investors to be opportunistic moving forward.
"Fundamentals at Z/COMP correlate most closely with the volume of homes sold, while OPEN's fundamentals track closer to home prices. With that in mind, we see a clear road map to follow for investors to be opportunistic as any recovery unfolds," said analysts.