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Investing.com - Bernstein SocGen Group upgraded Zillow Group (NASDAQ:ZG) stock rating from Market Perform to Outperform on Wednesday, raising its price target to $105.00 from $75.00. The stock, currently trading near its 52-week high of $88.45, has delivered an impressive 40% return over the past year.
The upgrade reflects Bernstein’s increasing confidence in Zillow’s fundamental story, citing recent execution that has delivered mid-teens revenue growth and the emergence of new business segments including Rentals and Showcase. InvestingPro data confirms this trajectory, showing 15.3% revenue growth and a robust gross profit margin of 75.8%.
Bernstein highlighted improving earnings quality as GAAP EBIT is expected to inflect positively, along with the possibility of declining interest rates as additional factors supporting the upgrade decision.
The research firm projects that Zillow can compound EBITDA by 25-30% while maintaining mid-teens revenue growth, with operating leverage potentially surprising to the upside in 2027/28.
While Bernstein’s outlook doesn’t assume significant improvement in the housing market, it notes that any recovery from current Existing Home Sales running 20-30% below normal levels would represent "a major potential unlock for earnings upside." The company maintains strong financial health with a current ratio of 3.34 and more cash than debt on its balance sheet.
In other recent news, Zillow Group announced plans to unwind capped call transactions, expecting to receive 3.1 million shares of its Class C capital stock and $38.2 million in cash. This move is related to the company’s previously settled convertible senior notes and will reduce the total number of Class C shares outstanding. Additionally, Piper Sandler raised its price target for Zillow to $94, citing strong execution despite a housing slump, and noted that Zillow’s second-quarter results exceeded expectations by approximately 1% for both revenue and EBITDA. The firm maintained an Overweight rating, highlighting the company’s Flex revenue growth, which increased 44% year-over-year. Meanwhile, RBC Capital reiterated its Outperform rating with a $95 price target, emphasizing Zillow’s resilience in the housing market and its AI-enhanced products. In a strategic move, Zillow partnered with Berkshire Hathaway HomeServices to provide U.S.-based agents access to the AI-powered Zillow Showcase, which reportedly improves listing outcomes. These developments reflect Zillow’s ongoing strategic initiatives and partnerships aimed at enhancing its market position.
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