Zillow Shares Drop Due to Legal Costs Impact
Written by Emily J. Thompson, Senior Investment Analyst
Updated: 3 days ago
0mins
Should l Buy Z?
Source: Yahoo Finance
- Legal Costs Impact: Zillow Group's shares fell approximately 17% on Wednesday as the company warned that legal expenses would negatively affect earnings in 2026, raising investor concerns about future profitability.
- Strong Revenue Growth: Despite legal challenges, Zillow reported an 18% year-over-year revenue increase to $654 million in Q4, driven by a 45% surge in rental revenue to $168 million, partially offsetting negative impacts.
- Improved Profitability: The company's adjusted EBITDA rose 33% to $149 million, indicating enhanced profitability in its core business operations, which could attract long-term investors despite short-term challenges.
- Market Expectations Missed: Management's guidance for Q1 revenue between $700 million and $710 million, with adjusted EBITDA of $160 million to $175 million, fell short of Wall Street's expectations of $184 million, further exacerbating investor concerns.
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Analyst Views on Z
Wall Street analysts forecast Z stock price to rise
8 Analyst Rating
3 Buy
5 Hold
0 Sell
Moderate Buy
Current: 43.820
Low
70.00
Averages
87.40
High
100.00
Current: 43.820
Low
70.00
Averages
87.40
High
100.00
About Z
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.
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- 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
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See More
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- 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.
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See More
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- 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
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- Market Panic Overreaction: AWS Chief Matt Garman stated that investor fears regarding AI models potentially slowing software company growth are overblown, emphasizing that core business metrics have not deteriorated, reflecting an excessive market reaction to technology stocks.
- AI-Driven Industry Transformation: Garman noted that AI will change how software is consumed and built, and while large SaaS providers face challenges, they still have an advantage in innovation and must continuously evolve to avoid disruption.
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