The Housing Market Is Stagnant. Zillow Stock Is Still a Good Bet, Analyst Says.

Bernstein upgraded Zillow Group stock to Outperform in a research note. (Dreamstime)

Key Points

About This Summary

• Bernstein upgrades Zillow to Outperform and raises its price target to $105, citing progress in monetizing user engagement.
• Zillow’s stock already has increased significantly this year, but Bernstein believes there is still room to grow.
• Bernstein anticipates Zillow’s adjusted earnings to increase in fiscal 2027, driven by market execution.

For more than three years, home sales have been hovering around their lowest levels since the Great Recession. That doesn’t mean all housing stocks are doomed, said analysts at Bernstein.

The firm upgraded Zillow Group , the dominant online buying and rental platform, to Outperform from Market Perform and lifted its price target on the stock to $105 from $85 in a research note Wednesday.

“Zillow’s position at the top of the funnel has always been appealing to us,” wrote Bernstein’s Nikhil Devnani. “And now we feel the company is showing greater progress on monetizing all of that attention and engagement.”

Zillow shares were up 3.3% to at $91.51 on Wednesday.

The stock has already gained 24% this year and 41% over the last 12 months, and Bernstein conceded it should have upgraded Zillow months ago. But Zillow still has room to rise given its strong earnings momentum and the potential for a housing market rebound, the firm said.

Zillow is “under-earning,” Devnani noted, because the housing market remains stagnant, resulting in fewer listings and transactions. But mortgage rates may be set to decline, and a big enough drop could cause housing sales to pop, Lawrence Yun, the National Association of Realtors’ chief economist, told Barron’s this week.

The company has performed well even in the current housing climate. It has a roughly two-thirds audience share in the online real estate market, Bernstein noted, and while user numbers may not grow much, revenue per user and conversion rates could still improve.

Whenever Zillow beats revenue expectations— as it did in the first and second quarters this year—profit margins grow accordingly, Bernstein pointed out. If the housing market heats up, profits also should grow accordingly. Bernstein sees a path to $1.05 billion in adjusted earnings before interest, taxes, depreciation, and amortization in fiscal 2027, up from an estimated $615 million in 2025.

“We cannot completely separate ourselves from the macro nature of Zillow’s business,” Devnani wrote. “However, if the company executes and takes share, the stock should deliver healthy earnings growth.”

Wall Street remains split on the stock. Of the 31 analysts polled by FactSet, 15 rate the stock a Buy or equivalent, 14 rate it a Hold, and two analysts have counseled investors to sell.

Write to Nate Wolf at nate.wolf@barrons.com