Zillow Shares Drop Due to Legal Cost Concerns
Written by Emily J. Thompson, Senior Investment Analyst
Updated: 1h ago
0mins
Source: Fool
- Legal Cost Impact: Zillow anticipates that legal expenses will weigh on earnings in 2026, leading to a 17% drop in stock price on Wednesday, reflecting investor concerns about future profitability.
- Strong Revenue Growth: Despite legal challenges, Zillow's revenue rose 18% year-over-year to $654 million in Q4, with rental revenue surging 45% to $168 million, partially offsetting negative impacts.
- Improved Profitability: Zillow's adjusted EBITDA climbed 33% to $149 million, indicating enhanced profitability in its core business operations.
- Cautious Future Outlook: Management expects Q1 revenue between $700 million and $710 million, with adjusted EBITDA of $160 million to $175 million, falling short of Wall Street's $184 million forecast, highlighting the potential impact of legal costs on earnings.
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Analyst Views on ZG
Wall Street analysts forecast ZG stock price to rise over the next 12 months. According to Wall Street analysts, the average 1-year price target for ZG is 85.00 USD with a low forecast of 66.00 USD and a high forecast of 100.00 USD. However, analyst price targets are subjective and often lag stock prices, so investors should focus on the objective reasons behind analyst rating changes, which better reflect the company's fundamentals.
17 Analyst Rating
9 Buy
7 Hold
1 Sell
Moderate Buy
Current: 54.420
Low
66.00
Averages
85.00
High
100.00
Current: 54.420
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 Set to Announce Q4 Earnings on February 10th
- Earnings Announcement: Zillow (ZG) is set to release its Q4 2023 earnings after market close on February 10th, with consensus EPS estimates at $0.40 and revenue expectations at $650.34 million, indicating cautious market sentiment regarding its financial performance.
- EPS Estimate Changes: Over the past three months, Zillow's EPS estimates have seen two upward revisions and one downward revision, reflecting analysts' differing views on the company's profitability, which could impact investor confidence.
- Revenue Estimate Fluctuations: Revenue estimates have also experienced two upward revisions and two downward revisions, suggesting mixed market perceptions of Zillow's revenue growth potential in the current economic climate, which may affect its stock performance.
- Rating Downgrade Impact: Zillow's rating was downgraded by Mizuho amid increasing market structure uncertainty, potentially heightening investor concerns about its future performance and affecting its market valuation.
See More
Zillow Shares Drop Due to Legal Cost Concerns
- Legal Cost Impact: Zillow anticipates that legal expenses will weigh on earnings in 2026, leading to a 17% drop in stock price on Wednesday, reflecting investor concerns about future profitability.
- Strong Revenue Growth: Despite legal challenges, Zillow's revenue rose 18% year-over-year to $654 million in Q4, with rental revenue surging 45% to $168 million, partially offsetting negative impacts.
- Improved Profitability: Zillow's adjusted EBITDA climbed 33% to $149 million, indicating enhanced profitability in its core business operations.
- Cautious Future Outlook: Management expects Q1 revenue between $700 million and $710 million, with adjusted EBITDA of $160 million to $175 million, falling short of Wall Street's $184 million forecast, highlighting the potential impact of legal costs on earnings.
See More
Zillow Reports Strong Revenue Growth but Legal Costs Weigh on Earnings Outlook
- 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.
See More
U.S. Markets Closed with Mixed Results on Wednesday, Driven by Vertiv Holdings' Gains and Unity Software's Decline
- U.S. Stock Market Performance: U.S. stock indexes ended the day mixed, with some indexes showing little change.
- Index Movements: The S&P 500 index finished flat, while the Dow Jones Industrial Average declined by 0.13% and the Nasdaq fell by 0.16%.
See More
Analyst Reiterates Hold Rating Amid Cautious Outlook
- Earnings Power Outlook: The analyst expects that in 2025, the company could achieve 50% incremental margins excluding legal costs, but with those costs included, margins are projected to remain in the 30%-40% range, indicating uncertainty in short-term profitability.
- Revenue Growth Potential: Although revenue growth is expected to slow from 16% in 2026 to 11% in 2027, the analyst notes that a recovery in the housing market could serve as the most significant revenue catalyst, likely leading to gradual revenue increases.
- Impact of Legal Costs: The analyst believes that rising legal expenses are putting pressure on the company's short-term profitability, although a decline in these costs is anticipated by 2027, which could improve earnings visibility.
- Quarterly Results and Guidance: The fourth-quarter adjusted EBITDA fell 2% short of expectations, while first-quarter guidance was 5% below projections primarily due to rising costs; however, the analyst has improved expectations for the second half of 2026, indicating enhanced operating leverage.
See More
Zillow Group Stock Declines Amid Mixed Earnings and Legal Costs
- Mixed Earnings Report: Zillow Group's earnings report revealed revenues and profits falling short of market expectations, leading to a stock decline that reflects the company's challenges and uncertainties in the current economic environment.
- Rising Legal Costs: The increase in legal expenses further compresses profit margins, raising investor concerns about future profitability and potentially undermining shareholder confidence.
- Analyst Cautions on Competitive Risks: Needham analysts expressed caution regarding Zillow's competitive risks, noting that intensified market competition could lead to uncertain margins, heightening investor risk aversion.
- Negative Market Reaction: The dual impact of disappointing earnings and legal issues has resulted in a stock price drop for Zillow, diminishing market confidence in its future growth prospects and potentially leading to capital outflows.
See More
Zillow Set to Announce Q4 Earnings on February 10th
- Earnings Announcement: Zillow (ZG) is set to release its Q4 2023 earnings after market close on February 10th, with consensus EPS estimates at $0.40 and revenue expectations at $650.34 million, indicating cautious market sentiment regarding its financial performance.
- EPS Estimate Changes: Over the past three months, Zillow's EPS estimates have seen two upward revisions and one downward revision, reflecting analysts' differing views on the company's profitability, which could impact investor confidence.
- Revenue Estimate Fluctuations: Revenue estimates have also experienced two upward revisions and two downward revisions, suggesting mixed market perceptions of Zillow's revenue growth potential in the current economic climate, which may affect its stock performance.
- Rating Downgrade Impact: Zillow's rating was downgraded by Mizuho amid increasing market structure uncertainty, potentially heightening investor concerns about its future performance and affecting its market valuation.
See More
Zillow Shares Drop Due to Legal Cost Concerns
- Legal Cost Impact: Zillow anticipates that legal expenses will weigh on earnings in 2026, leading to a 17% drop in stock price on Wednesday, reflecting investor concerns about future profitability.
- Strong Revenue Growth: Despite legal challenges, Zillow's revenue rose 18% year-over-year to $654 million in Q4, with rental revenue surging 45% to $168 million, partially offsetting negative impacts.
- Improved Profitability: Zillow's adjusted EBITDA climbed 33% to $149 million, indicating enhanced profitability in its core business operations.
- Cautious Future Outlook: Management expects Q1 revenue between $700 million and $710 million, with adjusted EBITDA of $160 million to $175 million, falling short of Wall Street's $184 million forecast, highlighting the potential impact of legal costs on earnings.
See More
Zillow Reports Strong Revenue Growth but Legal Costs Weigh on Earnings Outlook
- 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.
See More
U.S. Markets Closed with Mixed Results on Wednesday, Driven by Vertiv Holdings' Gains and Unity Software's Decline
- U.S. Stock Market Performance: U.S. stock indexes ended the day mixed, with some indexes showing little change.
- Index Movements: The S&P 500 index finished flat, while the Dow Jones Industrial Average declined by 0.13% and the Nasdaq fell by 0.16%.
See More
Analyst Reiterates Hold Rating Amid Cautious Outlook
- Earnings Power Outlook: The analyst expects that in 2025, the company could achieve 50% incremental margins excluding legal costs, but with those costs included, margins are projected to remain in the 30%-40% range, indicating uncertainty in short-term profitability.
- Revenue Growth Potential: Although revenue growth is expected to slow from 16% in 2026 to 11% in 2027, the analyst notes that a recovery in the housing market could serve as the most significant revenue catalyst, likely leading to gradual revenue increases.
- Impact of Legal Costs: The analyst believes that rising legal expenses are putting pressure on the company's short-term profitability, although a decline in these costs is anticipated by 2027, which could improve earnings visibility.
- Quarterly Results and Guidance: The fourth-quarter adjusted EBITDA fell 2% short of expectations, while first-quarter guidance was 5% below projections primarily due to rising costs; however, the analyst has improved expectations for the second half of 2026, indicating enhanced operating leverage.
See More
Zillow Group Stock Declines Amid Mixed Earnings and Legal Costs
- Mixed Earnings Report: Zillow Group's earnings report revealed revenues and profits falling short of market expectations, leading to a stock decline that reflects the company's challenges and uncertainties in the current economic environment.
- Rising Legal Costs: The increase in legal expenses further compresses profit margins, raising investor concerns about future profitability and potentially undermining shareholder confidence.
- Analyst Cautions on Competitive Risks: Needham analysts expressed caution regarding Zillow's competitive risks, noting that intensified market competition could lead to uncertain margins, heightening investor risk aversion.
- Negative Market Reaction: The dual impact of disappointing earnings and legal issues has resulted in a stock price drop for Zillow, diminishing market confidence in its future growth prospects and potentially leading to capital outflows.
See More
