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On Thursday, Piper Sandler reaffirmed its Overweight rating on Zillow Group (NASDAQ:ZG) with a steady price target of $90.00. The firm’s analysis indicates that Zillow’s fourth-quarter Flex (NASDAQ:FLEX) revenue, which saw a year-over-year increase of 67%, continues to surpass the core Marketplace Brand Portfolio’s (MBP) performance, which experienced a 17% decline over the same period. This performance contributed to Zillow’s overall revenue growth of 15% year-over-year, reaching $2.2 billion. According to InvestingPro data, the company maintains a strong market position with a market capitalization of $16.9 billion, though its stock currently appears overvalued based on InvestingPro’s Fair Value analysis.
Piper Sandler’s positive outlook on Zillow Group is driven by several factors. Firstly, the firm recognizes the gains in market share by Zillow’s Premier Agent, largely attributed to the Flex program. Secondly, the introduction of new products and the potential for further innovation are seen as a positive sign for the company’s future. Thirdly, while the broader housing market is expected to improve, Piper Sandler notes that an uptick in the housing market is not essential for Zillow’s stock to perform well. InvestingPro analysis reveals the company’s strong financial position, with a healthy current ratio of 2.81 and impressive gross margins of 76.4%, suggesting operational efficiency despite market challenges.
Despite the volatility in Zillow’s share prices, Piper Sandler remains optimistic. The firm highlights that evidence is mounting in favor of Zillow’s enhanced markets, with management’s expectations to expand to approximately 92 enhanced markets by April 2025, a significant increase from just around 19 in June 2024.
While some bearish sentiment remains due to macroeconomic factors, stock-based compensation (SBC) concerns, and the ongoing National Association of Realtors (NAR) lawsuit, Piper Sandler believes these issues have not noticeably affected Zillow’s business. The firm maintains that Zillow stands as the top real estate portal in the U.S. and is currently undergoing an underappreciated product cycle. Furthermore, Piper Sandler suggests that the valuation looks reasonable at approximately 21 times the forecasted FY26 EBITDA.
The reaffirmation of the Overweight rating and $90 price target by Piper Sandler underscores their belief in Zillow Group’s current strategy and future prospects, despite the challenges presented by the external environment and ongoing litigation. InvestingPro subscribers have access to additional insights, including 7 more exclusive ProTips and a comprehensive analysis of Zillow’s financial health. The platform’s detailed Pro Research Report offers deep-dive analysis and expert insights, helping investors make informed decisions about this volatile stock (Beta: 2.34).
In other recent news, Zillow Group’s fourth-quarter earnings results have garnered significant attention, with revenue reaching $554 million and EBITDA at $112 million, slightly surpassing Wall Street expectations. The company reported an 11% year-over-year increase in residential segment revenue to $387 million, exceeding estimates. Analysts have responded to these developments with varied outlooks. DA Davidson raised Zillow’s price target to $90, maintaining a Buy rating, citing confidence in the company’s strategic initiatives and future growth prospects. Benchmark also lifted its price target to $110, reaffirming a Buy rating, highlighting Zillow’s transparency and potential to expand its market presence.
Conversely, Piper Sandler adjusted its price target to $90 from $93, keeping an Overweight rating, and noted Zillow’s conservative revenue growth expectations for the start of the year. BofA Securities increased the price target to $84 from $81, retaining a Neutral rating, while acknowledging the company’s slight earnings beat. Bernstein maintained a Market Perform rating with a $65 target, emphasizing the importance of Zillow returning to normal business operations and achieving market share gains. Overall, analysts have recognized Zillow’s strategic goals, including expanding its Enhanced Markets and partnerships, as key drivers for future growth.
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