Zillow Upgraded, Analyst Predicts Strong Growth With Lower Mortgage Rates On The Horizon

Zillow Group, Inc. Z shares are trading higher after Wedbush upgraded the stock from Neutral to Outperform and raised its price target from $50 to $80.

The analyst Jay McCanless writes they see a potential boost from lower mortgage rates for Zillow’s core brokerage business.

The S&S revenues, included in the Residential revenue line, have contributed to faster revenue growth compared to the national existing home market in recent quarters, adds the analyst.

McCanless maintained third-quarter estimates, which are at the high end of Zillow’s guidance for AEBITDA and revenue, as lower rates may not benefit buyers until the fourth quarter.

Related Read: Zillow Group Q2 Earnings: Revenue Beat, EPS Beat, Strong Guidance, New CEO, ‘Increasingly Diversified And Growing Business’

For FY25, the analyst raised the revenue estimate to $2.5 billion from $2.4 billion and AEBITDA estimate to $679 million from $600 million.

Segment-wise, the analyst increased FY25 growth estimates for Residential revenue to 17% and Rental revenue to 10%, driven by strong rental demand and high construction activity.

On the other hand, McCanless lowered the FY25 opex/sales target to 77% due to higher revenue.

Mortgage revenue is projected to grow 5% year-over-year, though upside risk remains if Residential revenue grows as expected, adds the analyst.

Investors can gain exposure to the stock via Global X PropTech ETF PTEC and Jacob Funds Inc. Jacob Forward ETF JFWD.

Price Action: Z shares are up 4.84% at $62.63 at the last check Monday.

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