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On Tuesday, Keefe, Bruyette & Woods analyst Ryan Tomasello adjusted the price target for CoStar Group (NASDAQ:CSGP) shares, bringing it down to $93 from the previous $96, while still maintaining an Outperform rating on the stock. Tomasello expressed a cautiously optimistic stance in anticipation of the company's forthcoming guidance, expecting it to be conservative and likely below Wall Street's predictions but in line with the buyside consensus.
Tomasello believes that despite the cautious approach to the near-term outlook, CoStar Group's prospects for 2025 remain promising. The company has demonstrated strong performance with revenue growth of 11.67% in the last twelve months, according to InvestingPro data. The analyst suggests that the company has the potential to reaccelerate its core bookings, which could position it to resume double-digit organic revenue growth, excluding the residential segment. He noted that the current valuation of CoStar Group's shares seems to have fully accounted for the risks associated with Homes.com, estimating a $10 to $20 per share impact. For deeper insights into CoStar Group's valuation and growth prospects, investors can access comprehensive analysis through InvestingPro's detailed research reports.
The revised price target reflects a more conservative view of CoStar Group's revenue growth, influenced by recent bookings. Tomasello's comments indicate that any positive shift in sentiment regarding the company's strategy with Homes.com could provide further benefits to the stock's performance.
In his analysis, Tomasello reiterated the Outperform rating, suggesting that despite the lowered price target, he remains confident in the company's ability to perform well in the long term. The adjustment in estimates and price target is a response to the latest data and market conditions, aiming to align expectations with the observed trends and potential future outcomes for CoStar Group.
In other recent news, CoStar Group reported an 11% year-over-year revenue increase in Q3, reaching $693 million, marking 54 consecutive quarters of double-digit growth. The company's net income also significantly increased to $53 million, up from $7 million in Q1 2024. In addition, CoStar Group completed the acquisition of Visual Lease, a leading lease administration and accounting software provider, aiming to enhance its Real Estate Manager business and offer expanded lease management and accounting solutions to a broader customer base.
Needham reiterated a Buy rating for CoStar Group, expressing confidence in the company's strategic shift in sales and favorable commercial real estate market environment. Meanwhile, Citi analysts maintained a Buy rating, albeit reducing the price target from $97.00 to $90.00.
CoStar Group plans to expand its sales force significantly, targeting over 275 hires by the end of 2024 and potentially doubling in 2025. The company's revenue guidance for the full year 2024 is set between $2.72 billion and $2.73 billion, with an adjusted EBITDA projected to be between $205 million and $215 million. These recent developments indicate a period of transition for CoStar Group, with expectations that bookings, which have reached $44 million, may have stabilized.
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