Zillow Group’s stock (Z) is on a roll today, soaring after Wedbush Securities upgraded the company from Neutral to Outperform. The investment firm also raised its price target from $50 to $80, a significant vote of confidence in Zillow’s future.
What’s driving this bullish sentiment? Wedbush analyst Jay McCanless believes lower mortgage rates could give a major boost to Zillow’s core brokerage business. He points to the company’s services and solutions (S&S) revenues, which are included in the Residential revenue line and have been growing faster than the national existing home market in recent quarters.
While McCanless kept his third-quarter estimates unchanged, he acknowledges that the benefits of lower rates might not be fully felt by buyers until the fourth quarter. He also raised Zillow’s revenue estimate for fiscal year 2025 to $2.5 billion from $2.4 billion, and its adjusted EBITDA estimate to $679 million from $600 million.
Looking further ahead, McCanless sees strong growth potential for Zillow. He increased his FY25 growth estimates for Residential revenue to 17% and Rental revenue to 10%, fueled by robust rental demand and significant construction activity. However, he also lowered the FY25 opex/sales target to 77% due to the expected higher revenue.
With mortgage revenue projected to grow 5% year-over-year, investors have several options to gain exposure to Zillow’s stock. The Global X PropTech ETF (PTEC) and the Jacob Funds Inc. Jacob Forward ETF (JFWD) both offer exposure to the company.
Zillow’s stock price is up 4.84% at $62.63 at the time of writing this article.
