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Investing.com - Citizens JMP initiated coverage on CoStar Group (NASDAQ:CSGP) with a Market Outperform rating and a $100 price target on Thursday. The stock, currently trading near its 52-week high of $83.68, has shown strong momentum with a ~14% year-to-date return.
The research firm cited CoStar’s "highly defensible" information suite and potential for revenue growth acceleration as commercial real estate markets recover. Citizens JMP also highlighted additional growth opportunities in multi-family properties and Homes.com. According to InvestingPro data, the company has demonstrated solid performance with an 11.3% revenue growth in the last twelve months and maintains a strong balance sheet with more cash than debt.
The positive rating primarily stems from expectations of improving profitability, with the firm stating that "peak Homes.com losses are likely behind the company." While Citizens JMP noted that CoStar is trading at the lower end of its historical valuation range, InvestingPro analysis suggests the stock is currently trading above its Fair Value, with high earnings and EBITDA multiples. Get access to 12+ additional ProTips and comprehensive valuation metrics with InvestingPro’s detailed research report.
The firm believes CoStar is not receiving proper credit for its "historically excellent capital allocation" and expects significant profitability expansion over the next two years. This outlook comes despite ongoing competition in the real estate information sector.
Citizens JMP clarified it does not expect Homes.com to take audience or agent spending from Zillow (NASDAQ:ZG), but believes CoStar can establish itself as the second player in the category with sufficient scale to support a profitable Homes.com business.
In other recent news, CoStar Group has announced a definitive agreement to acquire Domain Holdings Australia Limited for A$3.0 billion, expanding its reach in the Australian property market. The acquisition is contingent upon shareholder approval and regulatory clearances, with Nine Entertainment Co. Holdings Limited indicating its support. In financial developments, CoStar’s first-quarter earnings exceeded expectations, aided by the acquisition of Matterport (NASDAQ:MTTR) and effective cost management, leading Needham to raise its price target to $98 and maintain a Buy rating. Similarly, Citizens JMP reaffirmed its Market Outperform rating with an $85 target, highlighting CoStar’s robust performance in its core businesses. However, CoStar’s Residential segment investments are expected to reduce EBITDA margins significantly by 2025, as noted by BofA Securities, which resumed coverage with a Neutral rating. The company is also in the spotlight due to a federal court ruling against CREXi for copyright infringement, favoring CoStar in a lawsuit over copied real estate photos. These developments underscore CoStar’s strategic moves and ongoing legal challenges as it navigates the complexities of the real estate market.
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