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On Wednesday, UBS analyst Chris Kuntarich reaffirmed a Buy rating on Zillow Group (NASDAQ:ZG) shares with a steady price target of $98.00. Currently trading at $83.84 with a market capitalization of $20 billion, Zillow has seen its stock surge over 70% in the past six months. According to InvestingPro data, the company maintains a "GOOD" overall financial health score, with particularly strong momentum metrics. Kuntarich adjusted his forecasts for the company’s financial performance, noting a slight increase in revenue estimates for fiscal year 2025, now up by 0.8%. Conversely, the expected earnings before interest, taxes, depreciation, and amortization (EBITDA) were revised down by 2.1%. The company’s strong balance sheet shows more cash than debt, with a healthy current ratio of 3.13x. InvestingPro analysis reveals 14 additional key insights about Zillow’s financial position and growth prospects.
The analyst expressed surprise at Zillow’s initial revenue growth outlook for FY25, which anticipates "low to mid-teens" growth, surpassing UBS’s estimate of "double-digit growth." However, the anticipated acceleration in revenue through FY25 tempered his enthusiasm. Regarding EBITDA, Kuntarich mentioned a marginal reduction in margin expectations to 26.1%, which is a 70 basis point decrease. This adjustment accounts for 380 basis points of leverage in FY25, compared to 220 basis points the previous fiscal year. The change reflects a longer period of variable expense deleverage than originally expected, rather than the stability that was anticipated.
Despite these revisions, Kuntarich conveyed a level of comfort with the extended period of variable expense deleverage if it translates to multi-year gains in Enhanced Market conversions. He highlighted new data points indicating mid-teens adoption of Zillow Home Loans (ZHL) in more mature Enhanced Markets. With revenue growing at 13.12% and analysts expecting profitability this year, Zillow’s transformation shows promise. For deeper insights into Zillow’s valuation and growth metrics, access the comprehensive Pro Research Report available exclusively on InvestingPro, covering over 1,400 top US stocks. This bolsters his confidence in the company’s growth prospects, as he projects Enhanced Markets could increase from 21% of connections currently to 35% by the fourth quarter of FY25. Furthermore, Kuntarich views the early signs of repeatable success in emerging markets as a positive development that more investors might recognize and value moving forward.
In other recent news, Zillow Group has been the subject of several analyst updates. Benchmark raised the company’s stock price target to $100, maintaining a ’Buy’ rating. Analyst Daniel Kurnos expressed confidence in Zillow’s ability to manage mid-cycle margins and earnings effectively amidst industry uncertainties. Meanwhile, KeyBanc upgraded Zillow’s stock rating from ’Sector Weight’ to ’Overweight’, setting a similar target of $100. Analyst Sergio Segura suggested that Zillow could surpass current Wall Street estimates without relying on an increase in existing home sales through 2026.
DA Davidson also maintained a ’Buy’ rating on Zillow, with an $80 price target, citing robust U.S. housing industry transaction data. UBS lifted its price target for Zillow to $98, anticipating a positive influence on future earnings estimates from the company’s fourth quarter results. These are recent developments and demonstrate a generally positive outlook from analysts regarding Zillow’s financial performance and stock trajectory in the near term.
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