Piper Sandler cuts Zillow Group target to $90, keeps Overweight

On Wednesday, Piper Sandler adjusted its outlook on Zillow Group (NASDAQ:ZG) shares, reducing the price target to $90 from the previous $93 while maintaining an Overweight rating on the stock. Currently trading at $72.86, Zillow has shown remarkable momentum with a 70% surge over the past six months. The decision came after the company released its fourth-quarter results, which were better than the firm’s initial projections. According to InvestingPro data, analyst targets for the stock range from $50 to $110, with six analysts recently revising their earnings expectations upward. Despite this, Zillow Group has set conservative revenue growth expectations for the start of the year at 11%, a decrease from the 17% growth observed in the fourth quarter.

According to Piper Sandler, the tempered revenue outlook might be a strategic move to set cautious expectations. The firm believes that Zillow Group is effectively advancing its various business segments, including Touring, Mortgage, and Rentals, which collectively represent a significant revenue opportunity estimated at $5 billion. While not currently profitable, InvestingPro analysis indicates that net income is expected to grow this year, with analysts predicting a return to profitability. The analyst expressed confidence in Zillow Group’s strategic direction, stating that the company appears to be on track with its product roadmap. For deeper insights into Zillow’s financial health and growth prospects, investors can access the comprehensive Pro Research Report, available exclusively to InvestingPro subscribers.

The revised price target reflects a slight adjustment in response to Zillow Group’s conservative guidance for the upcoming period. With a gross profit margin of 76.4% and strong revenue growth of 13.1% in the last twelve months, Zillow Group’s execution of its strategic initiatives remains solid, and the company is progressing towards capturing the sizable market opportunity it has identified.

In summary, Piper Sandler’s adjustment of the price target for Zillow Group shares is a response to the company’s cautious revenue growth forecast for the start of the year. Nonetheless, the firm reaffirms its positive stance on the stock, emphasizing Zillow Group’s ongoing execution of its key business opportunities.

In other recent news, Zillow Group has been the subject of several analyst adjustments following its fourth-quarter earnings. BofA Securities analyst Nat Schindler increased Zillow’s price target to $84, maintaining a Neutral rating. Zillow’s Q4 revenue and EBITDA surpassed Wall Street’s expectations, with residential segment revenue rising 11% year over year. However, the company’s Q1 revenue and EBITDA guidance fell short of analysts’ predictions.

KeyBanc Capital Markets reduced its price target for Zillow to $95 while maintaining an Overweight rating. Despite Zillow’s solid Q4 performance, the results did not align with KeyBanc’s more optimistic estimates. Looking forward, KeyBanc expects Zillow to achieve market share gains, driving double-digit revenue growth and margin expansion.

Citi analyst Ronald Josey raised the price target for Zillow to $98, keeping a Buy rating. Zillow’s For Sale and Rentals segments experienced significant revenue growth, attributed to successful product initiatives. Josey is optimistic about Zillow’s scaling efforts in Enhanced Markets and its partnership with Redfin (NASDAQ:RDFN) in the Rentals space.

Cantor Fitzgerald analyst Deepak Mathivanan maintained a Neutral rating but increased the price target to $70. Zillow’s Q4 revenue and EBITDA surpassed estimates, despite a volatile real estate market. The company’s Q1 guidance was slightly below analyst expectations.

Lastly, UBS analyst Chris Kuntarich reaffirmed a Buy rating with a steady price target of $98. Kuntarich adjusted his forecasts for Zillow’s FY25 performance, noting a slight increase in revenue estimates and a decrease in expected EBITDA. Despite these revisions, Kuntarich expressed confidence in Zillow’s growth prospects.

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