AI Integration And Digital Shift Will Empower German Real Estate

Key Takeaways

• Accelerated AI adoption and digital migration are driving stronger platform efficiency, sustained user growth, and enhanced pricing power.
  
• Diversification into value-added services and network effects are boosting monetization, customer retention, and supporting resilient margin expansion.
  
• Heavy dependence on Germany's property market and rising competition, costs, and regulation threaten margins, revenue growth, and long-term market dominance.

Catalysts

Operates ImmoScout24, a digital platform for the residential and commercial real estate sectors in Germany and internationally.

• Scout24 is accelerating the integration of AI and machine learning in both its professional (Propstack AI) and consumer (HeyImmo) platforms, enabling automation of listings, conversational search, and greater operational efficiency, which should drive further ARPU uplift, reduce costs, and expand net margins.
  
• The ongoing shift in real estate search and transaction activity from offline to digital is a strong tailwind, demonstrated by record growth in B2C (over 500,000 subscribers) and B2B (approaching 26,000 customers) users, pointing to sustained top-line growth and improving pricing power as the platform entrenches itself as the digital leader.
  
• Expansion into adjacent, data-driven and value-added services (e.g., valuations, CRM, homeowner management, Living+ for rentals) is diversifying Scout24's revenue streams and enhancing monetization per customer, which is supporting both higher subscription revenues and margin expansion.
  
• Scout24's growing network effects-evident in increased multi-product adoption, rapidly rising listings (+12.8% YoY), and strong private/homeowner engagement-strengthen platform dominance and customer retention, indicating durable revenue growth and lower customer acquisition costs.
  
• Government investment initiatives (e.g., Bau-Turbo) and stabilization in mortgage rates are creating a healthier German real estate market, likely increasing transaction volumes and stimulating demand for Scout24's transaction enablement tools, which should contribute to higher revenue growth and improved earnings over the medium-term.

Scout24 Future Earnings and Revenue Growth

Assumptions

• Analysts are assuming Scout24's revenue will grow by 9.3% annually over the next 3 years.
• Analysts assume that profit margins will increase from 28.1% today to 36.4% in 3 years time.
• Analysts expect earnings to reach €299.9 million (and earnings per share of €4.31) by about August 2028, up from €177.3 million today. The analysts are largely in agreement about this estimate.
• In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 33.8x on those 2028 earnings, down from 46.4x today. This future PE is greater than the current PE for the GB Interactive Media and Services industry at 31.7x.
• Analysts expect the number of shares outstanding to decline by 1.33% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 5.96%, as per the Simply Wall St company report.

Scout24 Future Earnings Per Share Growth

Risks

• Scout24's strong revenue growth continues to rely heavily on Germany's residential real estate market, exposing it to macroeconomic cycles, demographic stagnation, and potential declines in transaction volumes, which could create periods of earnings volatility and revenue stagnation if the market slows.
  
• A rising threat from alternative digital real estate models and increasing competition (e.g., new PropTechs, Kleinanzeigen expanding its C2C platform, or tech giants like Google affecting classifieds/search) risks shrinking Scout24's market share and raises customer acquisition costs, negatively impacting top-line revenue and margins over the long term.
  
• Rapid growth comes with persistently high investment in product development, AI integration, and acquisition-related activities, which, if not matched by sustainable monetization and operational efficiency, could drive up operating expenses and pressure net margins or profitability in future years.
  
• Expansion of regulatory scrutiny, particularly on data privacy (GDPR and future EU digital laws), or increased housing affordability/tenant protective measures, could limit Scout24's ability to monetize data, restrict core revenue streams, or add compliance costs, putting downward pressure on both revenue and net profit.
  
• The sector is at risk of disruption from long-term industry changes such as blockchain-enabled property transactions or a possible plateau in agent/landlord willingness to pay for premium portal listings, which could erode Scout24's pricing power, hinder ARPU growth, and limit future revenue or earnings expansion.

Valuation

• The analysts have a consensus price target of €123.394 for Scout24 based on their expectations of its future earnings growth, profit margins and other risk factors. However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of €142.0, and the most bearish reporting a price target of just €95.0.
  
• In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be €822.9 million, earnings will come to €299.9 million, and it would be trading on a PE ratio of 33.8x, assuming you use a discount rate of 6.0%.
  
• Given the current share price of €114.0, the analyst price target of €123.39 is 7.6% higher. The relatively low difference between the current share price and the analyst consensus price target indicates that they believe on average, the company is fairly priced.
  
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.