CoStar Group (CSGP) Stock Forecast & Price Target

CoStar Group has demonstrated resilience and adaptability, achieving $1.0 billion in revenue last year with a growth rate of 10%, bolstered by a 6% organic increase and the integration of hotel data vendor STR contributing approximately 4 percentage points. The company has also shown a strong capacity for growth during challenging market conditions, with high-teen growth rates observed during the pandemic and the recent capability to generate net new bookings through a strategic expansion of its salesforce by ~500 personnel. Furthermore, a recent surge in revenue growth to 13% in the first half of the year highlights the effectiveness of its merger and acquisition strategies, alongside a solid organic growth of 9%.

CoStar Group's financial outlook is negatively impacted by a significant decline in consolidated margins, which have dropped to high single digits due to increased residential investments and capital expenditures, including $343 million allocated for a new building in 2024 and $361 million for facility expansions in 2025. The company also reported weakened performance in the luxury segment, with rent growth stagnating at approximately 0.5% year-over-year and a vacancy rate around 11.5%, reflecting challenges in one of its market segments. Additionally, the substantial ~$900 million investment in Apartments.com has led to a compression of EBITDA margins, which fell to 9% in 2024 and are projected to recover only to 12.5% in the current year, signaling ongoing operational difficulties despite a robust core commercial real estate business.