Digital Integration And Rentals Expansion Will Shape Future Markets

Key Takeaways

• Integrated digital marketplace strategy, tech investments, and dominant user engagement drive higher conversion rates, revenue growth, and monetization per transaction across home buying and rentals.
  
• Rental segment expansion and exclusive partnerships underpin management’s confidence in surpassing ambitious revenue targets and support Zillow’s leadership as regulations favor digital real estate hubs.
  
• Zillow faces ongoing margin and revenue pressures from housing market challenges, agent model shifts, competitors, and execution risks as it pursues rentals segment and product expansion.

Catalysts

Operates real estate brands in mobile applications and Websites in the United States.

• The company’s integrated digital marketplace strategy—including seamless home search, mortgage, title, and rental solutions—is gaining traction, with expanding “Enhanced Markets” driving higher conversion, deeper user engagement, and above-market residential revenue growth; this approach is expected to increase revenue per transaction and lift overall revenue growth in line with ongoing digitalization and user expectation shifts.
  
• Accelerating expansion of Zillow Rentals, especially in multifamily, fueled by exclusive listing partnerships (Redfin, Realtor.com, AppFolio), a rapidly growing property base (2 million+ listings, 60,000+ large multi-family properties), and tiered advertising adoption, underpins management’s confidence in reaching the $1B+ rentals revenue target and supports robust total revenue expansion.
  
• Continued investment in AI-powered personalization, agent tools (e.g., Follow Up Boss, Real Time Touring), and immersive experiences (Showcase 3D/AI-powered floor plans and media) leverages consumer demand for data-driven, tech-enabled real estate, likely to drive increased monetization per user and structurally higher net margins as more transactions move online.
  
• Marketplace network effects—stemming from Zillow’s dominant direct user engagement (4x industry app engagement, 2/3 of US movers touch Zillow) and trusted platform reputation—position the company to maintain/expand pricing power and drive increased advertising and service revenue, supporting long-term earnings scalability.
  
• Ongoing industry trends toward greater transparency, digital transaction workflows, and regulatory requirements for open listing data further strengthen Zillow's position as a leading, trusted hub, likely accelerating audience growth and transaction volumes, which supports both top-line revenue and long-term net income growth.

Zillow Group Future Earnings and Revenue Growth

Assumptions

• Analysts are assuming Zillow Group's revenue will grow by 15.0% annually over the next 3 years.
• Analysts assume that profit margins will increase from -3.5% today to 10.7% in 3 years time.
• Analysts expect earnings to reach $375.5 million (and earnings per share of $1.34) by about May 2028, up from $-81.0 million today. However, there is a considerable amount of disagreement amongst the analysts with the most bullish expecting $556 million in earnings, and the most bearish expecting $156.3 million.
• In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 71.8x on those 2028 earnings, up from -199.2x today. This future PE is greater than the current PE for the US Real Estate industry at 18.3x.
• Analysts expect the number of shares outstanding to grow by 4.32% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 7.48%, as per the Simply Wall St company report.

Zillow Group Future Earnings Per Share Growth

Risks

• Persistent housing affordability challenges — driven by high interest rates, limited inventory, and stagnant wage growth — continue to depress transaction volumes, especially among first-time and lower/middle market buyers, which limits Zillow’s addressable market growth and directly pressures revenue and earnings even as user demand stays elevated.
  
• Zillow’s expansion strategy and revenue growth are increasingly weighted to the Rentals/multifamily segment, which, while growing rapidly, faces risks of market saturation, cyclical downturns in the rental market, increased competition, and the need for continued investment in sales and marketing, all factors that could constrain net margin expansion or increase cost pressures.
  
• Heavy reliance on top-producing real estate agents and Premier Agent revenues means Zillow remains exposed to cyclical and secular shifts in residential real estate brokerage models, including the rise of tech-enabled, direct, or flat-fee alternatives that may erode the agent advertising spend and put pressure on core revenue streams.
  
• Integration, execution, and profitability risks exist around scaling new products and partnerships (such as Enhanced Markets, Showcase, and the Redfin rentals partnership); should adoption stall, variable costs could outpace revenue growth or capital could be stranded on failed diversification attempts, impacting margin and net income performance.
  
• Ongoing and accelerating industry disruption — including technology-driven low-cost listing platforms, Realtor/MLS consolidation increasing their bargaining power, and regulatory shifts related to data privacy or MLS transparency — could ultimately weaken Zillow’s competitive moat and reduce monetization opportunities, posing long-term risks to both revenue growth and margins.

Valuation

• The analysts have a consensus price target of $79.214 for Zillow Group 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 $100.0, and the most bearish reporting a price target of just $60.0.
  
• In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be $3.5 billion, earnings will come to $375.5 million, and it would be trading on a PE ratio of 71.8x, assuming you use a discount rate of 7.5%.
  
• Given the current share price of $66.84, the analyst price target of $79.21 is 15.6% higher.
  
• 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.