Zillow (ZG) Stock Forecast & Price Target

Zillow Group Inc. demonstrated strong financial performance in Q4, with rentals revenue increasing by 25% year-over-year and residential sales revenue rising by 15% year-over-year, both exceeding expectations. The company's mortgage revenue saw significant growth, accelerating by 86% year-over-year due to a notable increase in purchase loan origination volume, which rose by 90%. Additionally, the potential to return to normalized transaction levels in the housing market could offer Zillow an opportunity for $1 billion in additional revenue, while management anticipates steady margin improvement from efficiently leveraging fixed costs.

Zillow Group Inc. is experiencing significant challenges, as evidenced by depressed inventory levels and transaction volumes, leading to a projected EBITDA of $125-140 million, which falls below consensus estimates by 16.5%. The company faces headwinds in its Premier Agent segment, with slowing revenue growth characterized by modest average revenue per user (ARPU) and subscription gains, alongside risks related to lost home listings and declining lead conversion rates. Additional factors contributing to a negative outlook include rising interest rates potentially driving reduced growth and transaction volumes, resulting in realtor ad budget cuts and overall decreased profitability.