Zillow upgraded at Bernstein on growth, rentals and improving margins

Investing.com -- Bernstein has upgraded Zillow to Outperform from Market-Perform, lifting its price target to $105 from $75, citing stronger execution, new revenue drivers, and the potential for earnings upside.

“We upgrade Zillow from Market-Perform to Outperform and raise our PT to $105,” Bernstein analysts said, adding that they have “been warming up to the fundamental story on Zillow,” with concerns around timing and valuation now easing.

The brokerage highlighted several drivers: “recent execution on mid-teens revenue growth; the emergence of Rentals and Showcase; improving earnings quality as GAAP EBIT is also poised to inflect; and possibility of rates coming down.”

Bernstein expects Zillow to compound EBITDA by 25–30% with mid-teens revenue growth, with housing market normalization offering further upside.

The analysts pointed to Zillow’s strategy shift: “Zillow is now all about conversion rates and ARPU, which it is showing the capacity to improve upon with consistent share gains.” 

They expect the firm’s Enhanced Market strategy and transition to Flex to support lock-in for both consumers and agents. Bernstein forecasts a ~9.5% CAGR for Zillow versus ~4% for the broader market.

Rentals were described as “compelling,” with Bernstein projecting revenues exceeding $1 billion by 2028, positioning Zillow to consolidate the online rental market alongside CoStar. 

Showcase is expected to generate up to $200 million, while Mortgage could contribute $400 million, though the analysts cautioned that it remains “a cyclical/low multiple business.”

With a mandate to control costs and stock-based compensation, Bernstein expects margins to expand, saying it is already 5% ahead of consensus estimates. 

“Catalysts include lower rates/EHS improvement. But beyond macro, share gains, new revenue initiatives, and operating leverage” should drive the stock higher, Bernstein concluded.