On Thursday, Jefferies updated its outlook on Zillow (NASDAQ:Z) stock, which currently trades at $75.47, increasing the price target to $105 from $92 while maintaining a Buy rating. The stock has shown remarkable momentum, gaining nearly 54% over the past six months according to InvestingPro data.
The firm's analyst cited three main reasons for the positive stance on the online real estate platform, which currently commands a market capitalization of $17.4 billion. The first is an anticipated approximately 50% recovery in Housing Transaction (JO:TCPJ) Value, which is expected to benefit Zillow's Core Premier Agent business.
InvestingPro analysis indicates the company is currently overvalued compared to its Fair Value, though it maintains strong financial health with a current ratio of 3.13. Secondly, the expansion of new products is projected to provide over $500 million in incremental revenue by 2026. Lastly, the analyst pointed out that Zillow's low variable costs are likely to enhance revenue upside and lead to growth in EBITDA that outpaces its peers.
Zillow has shown a consistent pattern of financial performance, delivering upside results in the past 12 quarters. This track record is expected to persist as the company's revenue is bolstered by product expansions. The analyst's comments reflect confidence in Zillow's ability to continue this trend, further justifying the raised price target.
The Core Premier Agent program, which connects agents with buyers and sellers, stands to gain from the recovery in the housing market. As transaction values rise, Zillow's revenue from this service is likely to increase, contributing to the company's overall financial growth.
In addition to the Core Premier Agent, Zillow's introduction of new products is anticipated to significantly contribute to its revenue stream. These innovations are part of the company's strategy to diversify its offerings and tap into additional sources of income.
Zillow's strategy of maintaining low variable costs is expected to be a key factor in driving its EBITDA growth. This approach allows the company to scale its operations efficiently and capitalize on increased revenue without a corresponding rise in costs, which is particularly advantageous in the competitive online real estate market.
The company has demonstrated strong operational efficiency with a gross profit margin of 76.4% and revenue growth of 13.1%. For deeper insights into Zillow's financial health and growth prospects, including 8 additional exclusive ProTips, check out the comprehensive Pro Research Report available on InvestingPro.
In other recent news, Zillow Group (NASDAQ:ZG), Inc. reported a 17% year-over-year revenue increase in its third-quarter 2024 earnings call, reaching $581 million and surpassing the company's revenue outlook. The growth was attributed to strong performance across its residential, rental, and mortgage segments.
The firm's strategic initiatives, including technology enhancements and market expansion, were noted as key contributors to this success. Zillow aims to be convertible debt-free by Q2 2025 and has returned $1.2 billion to shareholders through share repurchases.
Zillow anticipates a Q4 revenue between $525 million and $540 million, a 12% increase at the midpoint year-over-year. The company expects residential revenue to range from $364 million to $374 million for Q4. The firm maintains a long-term outlook of capturing significant market share in the $30 billion residential real estate sector.
The company's strategy includes the integration of Virtual Staging AI into Zillow Showcase, aiming to enhance digital staging capabilities. Zillow is targeting over $1 billion in rental revenue, indicating a strong long-term outlook. The firm expressed confidence in achieving double-digit revenue growth and margin expansion for Q4 and full-year 2024. These are the key recent developments for Zillow.
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