Earnings Release: Here's Why Analysts Cut Their Zillow Group, Inc. (NASDAQ:ZG) Price Target To US$55.43

Last week, you might have seen that Zillow Group, Inc. (NASDAQ:ZG) released its quarterly result to the market. The early response was not positive, with shares down 7.6% to US$39.19 in the past week. Revenues were a bright spot, with US$529m in revenue arriving 4.2% ahead of expectations, although statutory earnings didn't fare nearly so well, recording a loss of US$0.10, some 7.5% below consensus predictions. Following the result, the analysts have updated their earnings model, and it would be good to know whether they think there's been a strong change in the company's prospects, or if it's business as usual. So we collected the latest post-earnings statutory consensus estimates to see what could be in store for next year.

Check out our latest analysis for Zillow Group

Taking into account the latest results, the current consensus from Zillow Group's 27 analysts is for revenues of US$2.16b in 2024. This would reflect a credible 7.6% increase on its revenue over the past 12 months. The loss per share is expected to greatly reduce in the near future, narrowing 37% to US$0.43. Before this latest report, the consensus had been expecting revenues of US$2.18b and US$0.30 per share in losses. While this year's revenue estimates held steady, there was also a regrettable increase in loss per share expectations, suggesting the consensus has a bit of a mixed view on the stock.

With the increase in forecast losses for next year, it's perhaps no surprise to see that the average price target dipped 10% to US$55.43, with the analysts signalling that growing losses would be a definite concern. That's not the only conclusion we can draw from this data however, as some investors also like to consider the spread in estimates when evaluating analyst price targets. There are some variant perceptions on Zillow Group, with the most bullish analyst valuing it at US$77.00 and the most bearish at US$35.00 per share. This is a fairly broad spread of estimates, suggesting that analysts are forecasting a wide range of possible outcomes for the business.

Looking at the bigger picture now, one of the ways we can make sense of these forecasts is to see how they measure up against both past performance and industry growth estimates. One thing stands out from these estimates, which is that Zillow Group is forecast to grow faster in the future than it has in the past, with revenues expected to display 10% annualised growth until the end of 2024. If achieved, this would be a much better result than the 6.1% annual decline over the past five years. Compare this against analyst estimates for the broader industry, which suggest that (in aggregate) industry revenues are expected to grow 11% annually. So while Zillow Group's revenues are expected to improve, it seems that it is expected to grow at about the same rate as the overall industry.

The Bottom Line

The most important thing to take away is that the analysts increased their loss per share estimates for next year. They also reconfirmed their revenue estimates, with the company predicted to grow at about the same rate as the wider industry. The consensus price target fell measurably, with the analysts seemingly not reassured by the latest results, leading to a lower estimate of Zillow Group's future valuation.

With that said, the long-term trajectory of the company's earnings is a lot more important than next year. We have estimates - from multiple Zillow Group analysts - going out to 2026, and you can see them free on our platform here.

It is also worth noting that we have found 1 warning sign for Zillow Group that you need to take into consideration.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.