Zillow Reports Strong Revenue Growth but Legal Costs Weigh on Earnings Outlook
Written by Emily J. Thompson, Senior Investment Analyst
Updated: 3 days ago
0mins
Source: NASDAQ.COM
- Significant Revenue Growth: Zillow's fourth-quarter revenue rose 18% year-over-year to $654 million, driven by a 45% increase in rental revenue to $168 million, alleviating some concerns about future profitability.
- Improved Profitability: Adjusted EBITDA climbed 33% to $149 million, indicating enhancements in cost control and operational efficiency, which could position Zillow favorably in a competitive market.
- Negative Market Reaction: Despite strong performance, Zillow's stock fell approximately 17% on Wednesday, primarily due to management's forecast of legal costs impacting investor confidence, leading to significant sell-offs.
- Cautious Future Outlook: Management expects first-quarter revenue between $700 million and $710 million, with adjusted EBITDA of $160 million to $175 million, falling short of Wall Street's $184 million estimate, reflecting potential pressure from ongoing legal disputes.
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Analyst Views on ZG
Wall Street analysts forecast ZG stock price to rise
17 Analyst Rating
9 Buy
7 Hold
1 Sell
Moderate Buy
Current: 43.700
Low
66.00
Averages
85.00
High
100.00
Current: 43.700
Low
66.00
Averages
85.00
High
100.00
About ZG
Zillow Group, Inc. helps people find and get the home they want by connecting them with digital solutions, dedicated partners and agents, and buying, selling, financing, and renting experiences. The Company’s affiliates, subsidiaries, and brands include Zillow, Zillow Premier Agent, Zillow Home Loans, Zillow Rentals, Trulia, Out East, StreetEasy, HotPads, ShowingTime+, Spruce, and Follow Up Boss. It helps renters, buyers, sellers, and real estate professionals across all their residential real estate needs through its housing super app, which serves as an ecosystem of connected solutions for the tasks and services related to moving. It provides integrated transaction experience for movers through Zillow, its network of partners, its affiliated brands, and through a comprehensive suite of marketing software and technology solutions for the real estate industry, including ShowingTime+, Follow Up Boss and Spruce. It offers multifamily property managers a variety of advertising products.
About the author
Emily J. Thompson
Emily J. Thompson, a Chartered Financial Analyst (CFA) with 12 years in investment research, graduated with honors from the Wharton School. Specializing in industrial and technology stocks, she provides in-depth analysis for Intellectia’s earnings and market brief reports.
Zillow Stock Outlook: Revenue Beats, EPS Misses
- Earnings Performance: Zillow's fourth-quarter revenue of approximately $654 million slightly exceeded Wall Street expectations, yet the adjusted earnings per share of 39 cents fell short of consensus, indicating pressure on profitability.
- Future Guidance: Management has guided first-quarter revenue to a range of $700 million to $710 million, surpassing market estimates of $690 million, suggesting ongoing top-line growth potential despite challenges.
- Legal Costs and Competitive Pressure: In the near term, legal expenses and new rivals are weighing on Zillow's valuation; however, if legal spending normalizes and the housing market recovers, it could benefit the company in the long run.
- Technical Indicator Analysis: Zillow's RSI stands at 16.12, indicating the stock is in oversold territory, which may suggest a potential reversal; however, the MACD is below its signal line, reinforcing bearish sentiment, prompting traders to remain cautious.
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CBRE and Other Real Estate Stocks Decline Amid AI Disruption Fears
- AI Scare Trade Impact: Shares of CBRE, JLL, and Cushman & Wakefield fell on Thursday as investors reassessed the potential disruption of commercial real estate services by rapidly improving AI tools, raising concerns about the future of high-margin advisory services that rely heavily on human labor.
- CBRE Earnings Beat: CBRE Group reported a fourth-quarter adjusted EPS of $2.73, exceeding the consensus estimate of $2.67, although its revenue of approximately $11.63 billion fell slightly short of the expected $11.71 billion, indicating resilience in profitability despite market pressures.
- Optimistic Future Guidance: The company issued FY2026 adjusted EPS guidance of $7.30 to $7.60, with the midpoint above Wall Street estimates, although the stock ultimately closed down about 8% after an initial rise, reflecting market uncertainty about future performance.
- Rising Legal Costs Pressure: Commentary highlighted increasing legal costs and uncertainties related to private listing networks as near-term overhangs, further exacerbating investor concerns regarding the future profitability of real estate service firms.
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Zillow Shares Slide Despite Strong Growth and Rental Demand Surge
- Strong Performance: Zillow reported growth that outpaced the overall housing market, yet its shares continue to slide, indicating a market underestimation of its potential, which could undermine investor confidence.
- Surge in Rental Demand: The significant increase in rental usage highlights Zillow's growing ability to aggregate demand in the housing market, laying a foundation for future revenue growth.
- Platform Potential: Should Zillow successfully expand its platform to encompass both renting and buying homes, the upside for its stock could be tremendous, potentially attracting more investor interest.
- Market Misalignment: Despite Zillow's strong performance and robust market demand, the market has failed to adequately reflect these positive factors, which may lead to increased stock price volatility in the short term.
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AWS CEO Expresses Strong Confidence in Future Growth
- Cloud Revenue Growth: Amazon's cloud computing segment reported a revenue of $35.6 billion in Q4, reflecting a 24% year-over-year increase that surpassed analyst expectations, showcasing the segment's robust performance and ongoing growth potential in the market.
- Operating Margin Improvement: AWS achieved a 35% operating margin, slightly widening from the previous quarter, indicating positive progress in cost control and efficiency enhancement, thereby strengthening its profitability.
- Impact of AI Technology: AWS CEO Matt Garman stated that while market fears regarding AI models potentially slowing software company growth are overblown, AI is indeed a disruptive force that will change how software is consumed and built, emphasizing the necessity for continuous innovation.
- Growing Customer Demand: Garman highlighted that customer demand for computing technology and infrastructure will continue to rise, whether through self-building, AI-based solutions, or purchasing from SaaS vendors, a trend that will drive AWS's future business expansion.
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Rocket Companies Stock Drops 5.49% Amid Housing Market Concerns
- Market Reaction Negative: Rocket Companies' stock fell 5.49% to $17.62 on Thursday, reflecting heightened investor aversion to risks in real estate intermediaries following Zillow's disappointing earnings report.
- Zillow Earnings Impact: Despite Zillow reporting fourth-quarter revenue of $654 million, exceeding expectations, its adjusted EPS of 39 cents fell short, leading to a 19% drop in its shares, which negatively affected Rocket's market performance.
- AI Tool Concerns: Investor anxiety over new AI tools potentially disrupting the real estate transaction ecosystem has further pressured Rocket and other online housing platforms, resulting in fragile market sentiment and elevated risk premiums.
- Earnings Outlook Optimistic: Rocket is set to report earnings on February 26, with an EPS estimate of 8 cents and revenue forecast of $2.28 billion, indicating that despite current pressures, the market remains optimistic about its growth prospects.
See More
Zillow Stock Continues Decline Post Earnings Report
- Earnings Performance: Zillow reported fourth-quarter revenue of $654 million, exceeding Wall Street's $650 million estimate, yet adjusted earnings of 39 cents per share fell short of the 40 cents consensus, indicating pressure on profitability.
- Market Reaction: The stock plummeted over 17% on Wednesday, hitting a new 52-week low, and continued to decline by 2.45% on Thursday, reflecting investor concerns about earnings prospects amid legal costs and competitive risks.
- Legal Challenges: Zillow secured a preliminary injunction in its dispute with Compass Inc. regarding marketing strategies, which could intensify competition; however, analysts caution that legal uncertainties may cap the stock's valuation in the near term.
- Long-Term Outlook: Analysts project that Zillow could achieve approximately 50% incremental margins by 2025, with potential adjusted EBITDA margins reaching about 60% by 2027 if legal spending normalizes, but current market focus remains on legal costs and competitive threats.
See More
Zillow Stock Outlook: Revenue Beats, EPS Misses
- Earnings Performance: Zillow's fourth-quarter revenue of approximately $654 million slightly exceeded Wall Street expectations, yet the adjusted earnings per share of 39 cents fell short of consensus, indicating pressure on profitability.
- Future Guidance: Management has guided first-quarter revenue to a range of $700 million to $710 million, surpassing market estimates of $690 million, suggesting ongoing top-line growth potential despite challenges.
- Legal Costs and Competitive Pressure: In the near term, legal expenses and new rivals are weighing on Zillow's valuation; however, if legal spending normalizes and the housing market recovers, it could benefit the company in the long run.
- Technical Indicator Analysis: Zillow's RSI stands at 16.12, indicating the stock is in oversold territory, which may suggest a potential reversal; however, the MACD is below its signal line, reinforcing bearish sentiment, prompting traders to remain cautious.
See More
CBRE and Other Real Estate Stocks Decline Amid AI Disruption Fears
- AI Scare Trade Impact: Shares of CBRE, JLL, and Cushman & Wakefield fell on Thursday as investors reassessed the potential disruption of commercial real estate services by rapidly improving AI tools, raising concerns about the future of high-margin advisory services that rely heavily on human labor.
- CBRE Earnings Beat: CBRE Group reported a fourth-quarter adjusted EPS of $2.73, exceeding the consensus estimate of $2.67, although its revenue of approximately $11.63 billion fell slightly short of the expected $11.71 billion, indicating resilience in profitability despite market pressures.
- Optimistic Future Guidance: The company issued FY2026 adjusted EPS guidance of $7.30 to $7.60, with the midpoint above Wall Street estimates, although the stock ultimately closed down about 8% after an initial rise, reflecting market uncertainty about future performance.
- Rising Legal Costs Pressure: Commentary highlighted increasing legal costs and uncertainties related to private listing networks as near-term overhangs, further exacerbating investor concerns regarding the future profitability of real estate service firms.
See More
Zillow Shares Slide Despite Strong Growth and Rental Demand Surge
- Strong Performance: Zillow reported growth that outpaced the overall housing market, yet its shares continue to slide, indicating a market underestimation of its potential, which could undermine investor confidence.
- Surge in Rental Demand: The significant increase in rental usage highlights Zillow's growing ability to aggregate demand in the housing market, laying a foundation for future revenue growth.
- Platform Potential: Should Zillow successfully expand its platform to encompass both renting and buying homes, the upside for its stock could be tremendous, potentially attracting more investor interest.
- Market Misalignment: Despite Zillow's strong performance and robust market demand, the market has failed to adequately reflect these positive factors, which may lead to increased stock price volatility in the short term.
See More
AWS CEO Expresses Strong Confidence in Future Growth
- Cloud Revenue Growth: Amazon's cloud computing segment reported a revenue of $35.6 billion in Q4, reflecting a 24% year-over-year increase that surpassed analyst expectations, showcasing the segment's robust performance and ongoing growth potential in the market.
- Operating Margin Improvement: AWS achieved a 35% operating margin, slightly widening from the previous quarter, indicating positive progress in cost control and efficiency enhancement, thereby strengthening its profitability.
- Impact of AI Technology: AWS CEO Matt Garman stated that while market fears regarding AI models potentially slowing software company growth are overblown, AI is indeed a disruptive force that will change how software is consumed and built, emphasizing the necessity for continuous innovation.
- Growing Customer Demand: Garman highlighted that customer demand for computing technology and infrastructure will continue to rise, whether through self-building, AI-based solutions, or purchasing from SaaS vendors, a trend that will drive AWS's future business expansion.
See More
Rocket Companies Stock Drops 5.49% Amid Housing Market Concerns
- Market Reaction Negative: Rocket Companies' stock fell 5.49% to $17.62 on Thursday, reflecting heightened investor aversion to risks in real estate intermediaries following Zillow's disappointing earnings report.
- Zillow Earnings Impact: Despite Zillow reporting fourth-quarter revenue of $654 million, exceeding expectations, its adjusted EPS of 39 cents fell short, leading to a 19% drop in its shares, which negatively affected Rocket's market performance.
- AI Tool Concerns: Investor anxiety over new AI tools potentially disrupting the real estate transaction ecosystem has further pressured Rocket and other online housing platforms, resulting in fragile market sentiment and elevated risk premiums.
- Earnings Outlook Optimistic: Rocket is set to report earnings on February 26, with an EPS estimate of 8 cents and revenue forecast of $2.28 billion, indicating that despite current pressures, the market remains optimistic about its growth prospects.
See More
Zillow Stock Continues Decline Post Earnings Report
- Earnings Performance: Zillow reported fourth-quarter revenue of $654 million, exceeding Wall Street's $650 million estimate, yet adjusted earnings of 39 cents per share fell short of the 40 cents consensus, indicating pressure on profitability.
- Market Reaction: The stock plummeted over 17% on Wednesday, hitting a new 52-week low, and continued to decline by 2.45% on Thursday, reflecting investor concerns about earnings prospects amid legal costs and competitive risks.
- Legal Challenges: Zillow secured a preliminary injunction in its dispute with Compass Inc. regarding marketing strategies, which could intensify competition; however, analysts caution that legal uncertainties may cap the stock's valuation in the near term.
- Long-Term Outlook: Analysts project that Zillow could achieve approximately 50% incremental margins by 2025, with potential adjusted EBITDA margins reaching about 60% by 2027 if legal spending normalizes, but current market focus remains on legal costs and competitive threats.
See More
