On Friday, Piper Sandler adjusted its outlook on shares of Zillow (NASDAQ:Z) Group (NASDAQ:ZG), increasing the price target from $73.00 to $93.00 while maintaining an Overweight rating on the shares. The stock has shown remarkable momentum, delivering an ~88% return over the past six months and currently trading near its 52-week high of $83.67.
According to InvestingPro analysis, the stock appears overvalued at current levels. The firm's positive stance comes after a thorough review of management discussions and industry data, which suggests a stronger outlook for the company's Mortgage and Residential revenue growth in the upcoming years.
The optimism is supported by Zillow's solid financial position, with InvestingPro data showing a healthy current ratio of 3.13 and more cash than debt on its balance sheet.
The analyst from Piper Sandler has revised revenue and EBITDA forecasts upwards for 2025 and 2026 based on the new information. According to the firm, Zillow's Mortgage revenue is now expected to rise by 19% in 2025 and by a substantial 42% in 2026. Moreover, residential revenue is anticipated to grow at a mid-teens percentage rate in both years.
As a result of these adjustments, the overall revenue forecast for Zillow in 2025 has increased by 2%, with a closer to 5% rise projected for 2026. The EBITDA estimate for 2026 has been adjusted upward by a similar magnitude. The revised forecasts have led to an increase in the discounted cash flow (DCF)-based price target to $93.00 from the previous target of $73.00.
Piper Sandler continues to endorse Zillow as a compelling investment, highlighting the company as a product-led growth story. The firm anticipates an improving margin and profitability profile for Zillow, which supports the raised price target and positive rating.
With a gross profit margin of 76.4% and analysts predicting profitability this year, Zillow shows promising potential. Discover 12 additional exclusive insights and detailed financial analysis in the comprehensive Pro Research Report, available on InvestingPro.
In other recent news, Zillow Group has reported a robust third-quarter performance, with a 17% year-over-year revenue increase, reaching $581 million. This growth was primarily fueled by a 63% surge in mortgage revenue, which totaled $39 million.
Despite a net loss of $20 million, the company demonstrated effective cost management, with an EBITDA of $127 million. For the fourth quarter, Zillow projects a 12% year-over-year increase in revenue, anticipating earnings between $525 million and $540 million.
The real estate technology company has also seen significant developments in its corporate structure. Jun Choo has been promoted to Chief Operating Officer, taking over Zillow's for-sale business strategy and operations. This executive change follows the departure of Susan Daimler (OTC:MBGAF) and Matt Daimler, president of Zillow and senior vice president of product, respectively.
Analyst firms have shown confidence in Zillow's growth potential. Canaccord Genuity (TSX:CF) raised its stock price target for Zillow from $64 to $86, maintaining a Hold rating. Similarly, Piper Sandler confirmed its Overweight rating on Zillow shares, maintaining a price target of $73.00.
In a bid to strengthen its position in the real estate industry, Zillow has been expanding its market presence through strategic initiatives. These include the acquisition of Virtual Staging AI and the expansion of its partnership with Realtor.com. These recent developments highlight Zillow's commitment to enhancing its product offerings and operational efficiency.
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