CoStar Group's Careful Management Of Costs Amid Strong Competitive Foothold To Propel Growth: Analyst

Needham analyst Mayank Tandon reiterated a Buy rating on CoStar Group, Inc. (CSGP), raising the price target to $100 from $90.

CSGP recently reported second-quarter results, where earnings beat estimates.

The analyst notes that CSGP's 2Q23 results were mixed as softer commercial transaction volumes pressured Ten-X revenue, and LoopNet sales missed expectations. However, this was offset by margin leverage to drive an EPS beat.

The analyst remains remarkably upbeat about the company's careful management of costs, with strong growth in areas such as Apartments.com and Suite against a tough macro backdrop.

Tandon remains bullish on the shares, given CSGP's leading competitive positioning in the CRE information services and multifamily markets. 

However, the 3Q guide was light, and management revised the FY23 revenue outlook lower due to weaker CRE market conditions.

Though CSGP was able to raise its EPS outlook due to expense discipline, Tandon adds. 

While the softer property transactional volumes expected in 2H23 represent a headwind, the analyst believes this is due to macro factors such as elevated interest rates and recessionary fears rather than structural issues.

Price Action: CSGP shares are trading lower by 8% to $84.46 on the last check Wednesday.