On Thursday, Citi revised its price target for Zillow (NASDAQ:Z) Group (NASDAQ:ZG), a leading real estate and rental marketplace, reducing it to $58 from the previous $68 while sustaining a Buy rating on the stock. The adjustment reflects a cautious stance due to ongoing real estate market challenges but recognizes potential growth drivers.
The firm acknowledges that the real estate sector's current headwinds are impacting Zillow's financial outcomes. However, Citi anticipates that several product launches slated for the near future could drive double-digit year-over-year revenue growth for the company in the year ahead and beyond. Notably, Zillow's "Enhanced Markets" initiative is expected to expand to 40 markets by the end of the year, and "Real-Time Touring" is projected to be operational in 124 markets by the end of May.
Furthermore, Zillow's newer seller services, such as Showcase Listings (SCL), have shown promising trends. As of early April, there were approximately 3,000 SCLs, marking a 138% increase since December. These listings, which are associated with quicker sales times and pricing advantages, are anticipated to significantly contribute to Zillow's growth over time.
Citi also highlighted Zillow's increased focus on the rental market as a positive development. With multiple product catalysts in place and Zillow's positioning in light of the National Association of Realtors (NAR) settlement, the firm remains optimistic about the company's prospects. Nevertheless, the lowered price target to $58 reflects the limited visibility in the broader macroeconomic environment and the anticipated increase in investments by Zillow.
InvestingPro Insights
In light of Citi's updated analysis on Zillow Group (NASDAQ:ZG), considering real-time data and insights from InvestingPro can provide additional context for investors. Zillow's market capitalization stands at approximately $9.87 billion, with a high P/E ratio indicating that the market has growth expectations despite current unprofitability. The company's revenue for the last twelve months as of Q1 2024 is reported at $2.005 billion, showing a growth of 6.03%, with a notable quarterly revenue growth of 12.79%. This aligns with Citi's projection of potential double-digit year-over-year revenue growth.
InvestingPro Tips suggest that Zillow's management has confidence in the company's future, as evidenced by aggressive share buybacks. Additionally, the company's financial stability is supported by having more cash than debt on its balance sheet and liquid assets that exceed short-term obligations. While Zillow has not been profitable over the last twelve months, analysts predict profitability within this year, which may be a sign of an upcoming turnaround in performance. Moreover, Zillow's commitment to growth is clear, with no dividends being paid to shareholders, allowing for reinvestment into the business.
For those interested in a deeper analysis, there are additional InvestingPro Tips available at https://www.investing.com/pro/ZG, providing further insights into Zillow's financial health and market performance. Use the coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription, which includes access to these valuable tips and more.
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