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Zillow Stock’s Bull Case: Why This Recent Sell-Off Could Be a Buy

Zillow logo on phone with house background

Key Points

  • Zillow stock still has enough bullish factors working to bring a potential recovery rally after the company sold off by as much as 10%.
  • Wall Street analysts see double-digit rallies ahead for the stock, and institutional buyers see enough reason to buy it ahead of its earnings announcement.
  • Short interest also declined in the face of all these bullish factors, giving investors another reason to consider this stock a buy today.
  • 5 stocks we like better than Zillow Group.

Shares of real estate stocks seem to be on thin ice right now, but there are signs of a potential recovery coming first to those at the top of the value chain. While real estate investment trusts (REITs) see their prices underperform the S&P 500, investors will be surprised to see that they will be among the last to see a recovery.

Zillow Group Today

Zillow Group, Inc. stock logo
ZZ 90-day performance
Zillow Group
$77.09 +2.40 (+3.21%)
(As of 12/20/2024 05:40 PM ET)
52-Week Range
$38.45
$86.88
Price Target
$70.33

This is because the real estate services names could be first in line to see profit runs and higher valuations, and this is where stocks like Zillow Group Inc. NASDAQ: Z come into play for investors to consider moving forward. It may not be as discounted as some of the REITs to offer investors an opportunity to buy a dip today. Still, its recent decline to 87% of its 52-week high can definitely pose a potential new run higher as long as the right tailwinds play out.

Before investors get into the weeds of why real estate services stocks like Zillow are attractive today, they should first check in with Wall Street analysts for their opinions on the stock and some institutional investors to see what is actually happening in the back end to drive the stock to a new high before 2024 is over.

Wall Street Remains Bullish on Zillow Stock Despite Recent Sell-Off

Typically, Wall Street analysts will change their views on a stock after bearish price action, so the fact that they are still bullish for Zillow today means even more for investors. Those at Jefferies Financial Group recently reiterated their Buy rating for Zillow stock. Still, their price targets were the main event for investors.

Zillow Group Stock Forecast Today

12-Month Stock Price Forecast:
$70.33
-8.76% Downside
Moderate Buy
Based on 10 Analyst Ratings
High Forecast$90.00
Average Forecast$70.33
Low Forecast$60.00
Zillow Group Stock Forecast Details

By raising their valuations from $80 a share to $90 a share for Zillow, these analysts are directly calling for a net upside potential of as much as 51.4% from where the stock trades today, not to mention a new high for the year. More than that, a few institutional buyers also made their bullish views public recently.

Allocators from International Assets Investment Management decided to raise their stakes in Zillow stock to as big as $15.7 million today, giving investors a new indicator to justify a buy ahead of potential tailwinds. Even bearish traders decided to ditch their positions on Zillow stock over the past month, showing signs of capitulation.

Zillow stock’s short interest declined by as much as 3.8% during the past month despite the sell-off in the stock, which – all else being equal – should have actually attracted more short sellers to ride on the bearish momentum. Given that this wasn’t the case, investors can see the bullish evidence stacking up in favor of Zillow stock.

Key Fundamental Tailwinds Boosting Zillow Stock's Bullish Potential

It all starts with the ISM services PMI index, which shows the real estate leasing and services sector as one of the few that still manages to push expansion readings while most are falling into contraction territory. Now, services and leasing mean rentals and transaction services, where Zillow holds most of the market share today.

Seeing the recent boost in pending home sales, investors can see that Zillow now holds 50% more listings on its platform compared to last year. That means 50% more opportunities to generate revenue from fees and advertising services. Management knows this, so they’ve started pivoting the business accordingly ahead of time.

According to the company’s latest quarterly earnings press release, revenues as a whole rose by 13% over the past 12 months. However, most of this growth was driven by rentals, which outpaced residential revenue by 29% compared to only 8% during the year.

That would make sense, as investors can see mortgage rates rise right now, and the mortgage market index sits at lows not seen since 1996. Not surprisingly, shares of mortgage originator Rocket Companies Inc. NYSE: RKT are now down to 77% of their 52-week high prices, signaling weaknesses in the mortgage market.

Still, people need a place to live, and if it isn’t by buying, then it’ll be through renting. That’s why Zillow has invested a lot more capital and energy into that segment to anticipate the coming market shift. So far, these efforts seem to be paying off, considering the double-digit runs Wall Street expects to see from this stock.

One last check is found in Zillow stock’s valuation multiples compared to the rest of the peer group. On a price-to-book (P/B) basis, Zillow trades at only 3.1x today, coming well below the business services industry’s average valuation of 5.6x. This discount offers enough to close the gap between today’s sell-off and Wall Street analyst targets.

Maybe some of this recent bullishness comes ahead of the company’s earnings announcement, where the stock might deliver a surprising set of results backing these bullish theses into reality.

Zillow Group, Inc. (Z) Price Chart for Monday, December, 23, 2024

Should you invest $1,000 in Zillow Group right now?

Before you consider Zillow Group, you'll want to hear this.

MarketBeat keeps track of Wall Street's top-rated and best performing research analysts and the stocks they recommend to their clients on a daily basis. MarketBeat has identified the five stocks that top analysts are quietly whispering to their clients to buy now before the broader market catches on... and Zillow Group wasn't on the list.

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Gabriel Osorio-Mazilli
About The Author

Gabriel Osorio-Mazilli

Contributing Author

Value Stocks, Asian Markets, Macro Economics

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Companies Mentioned in This Article

CompanyMarketRank™Current PricePrice ChangeDividend YieldP/E RatioConsensus RatingConsensus Price Target
Zillow Group (Z)
1.4077 of 5 stars
$77.09+3.2%N/A-135.25Moderate Buy$70.33
Rocket Companies (RKT)
2.2388 of 5 stars
$11.82+1.6%10.85%-73.88Reduce$13.92
Zillow Group (Z)
1.4077 of 5 stars
$77.09+3.2%N/A-135.25Moderate Buy$70.33
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