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Tuesday, CoStar Group (NASDAQ:CSGP), a prominent player in the Real Estate Management & Development industry with a market capitalization of $31.07 billion, remains in focus as JMP Securities analyst Nicholas Jones reiterated a Market Outperform rating with an $85.00 price target. Jones highlighted CoStar Group's strategic shift towards increasing net new bookings in its core commercial business and continued investment in its nascent Homes.com platform. This strategy is reflected in recent changes to the company's Board of Directors. According to InvestingPro, the company maintains a strong financial position with more cash than debt on its balance sheet.
The analyst pointed out that investor attention is centered on the sustainability of growth for CoStar Suite, given the competitive pressures from large firms in the Multifamily sector, which could affect Apartments.com's market share and profit margins. While the company achieved 11.45% revenue growth in the last twelve months, there is concern that CoStar Group's investment in Homes.com could be more extensive and prolonged than initially expected. However, the recent announcement is believed to have alleviated some investor worries about ongoing spending on Homes.com, despite the possibility of less favorable key performance indicators (KPIs). InvestingPro analysis shows the stock is currently trading at elevated multiples, with additional insights available in the Pro Research Report.
Going forward, the analyst's attention will be on CoStar Group's ability to hire and train sales staff effectively, aiming to enhance net new booking trends. The firm's stance is that the company's recruitment efforts are likely to drive revenue growth in its core segments, while the drag from its Residential segment on the stock price is deemed excessive.
JMP Securities maintains the price target for CoStar Group at $85, which is based on approximately 25 times the enterprise value to estimated 2026 commercial EBITDA. CoStar Group's commitment to its core commercial operations and the potential for growth in this area continue to be the basis for the Market Outperform rating.
In other recent news, CoStar Group announced a significant legal victory in a trade secrets lawsuit against Move Inc., the operator of Realtor.com. The case, initiated in July 2024, was dismissed with prejudice, preventing Move from refiling. Additionally, CoStar Group has reshaped its board with the appointment of John Berisford, Rachel Glaser, and Christine McCarthy as independent directors, and Louise Sams as the new Chairman. This governance update includes the formation of a Capital Allocation Committee to oversee the company's investments and financial targets.
Goldman Sachs has maintained its Buy rating on CoStar Group, with a price target of $85, despite noting a decline in online traffic at Homes.com, which may affect residential revenue growth. Meanwhile, CoStar Group is engaged in discussions with Nine Entertainment about a potential acquisition of Domain Holdings Australia Ltd. These talks remain private, with no assurance of a revised proposal. JMP Securities has reiterated a Market Outperform rating for CoStar Group, acknowledging the challenges posed by Homes.com's performance but maintaining a positive outlook with a similar price target of $85.
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