Zillow Group (ZG) shares have pulled back over the past month, losing around 16%. Despite the recent slide, the stock remains up more than 21% over the past year. This reflects ongoing interest in the online real estate platform.
Momentum for Zillow Group appears to be cooling after an impressive run, with the stock giving back some gains recently. Even so, the 1-year total shareholder return of 21% puts its performance well ahead of many peers, which suggests that long-term optimism and growth potential are still part of the story.
With the recent pullback and shares still trading below analyst targets, is Zillow Group set for further gains and offering a bargain for investors, or has the market already accounted for the company’s future growth potential?
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Most Popular Narrative: 19.1% Undervalued
Zillow Group's most closely watched valuation narrative now points to a fair value of $88.46 per share, well above the last close of $71.53. This sets up a story of optimism driven by fundamental shifts in the real estate marketplace and digital innovation.
The shift toward integrated, end-to-end digital transaction ecosystems (such as Zillow 360 and Enhanced Markets) is enabling Zillow to capture more ancillary services revenue (mortgages, rentals, software). This reduces dependence on advertising and expands top-line growth, while also supporting EBITDA margin expansion through operational efficiencies.
What is fueling this surge in confidence? The narrative relies on breakthrough financial projections and a bold margin turnaround. Curious which future growth drivers and strategic bets are built into the valuation? Dive in to see the disputed assumptions that could unlock Zillow's next leg higher.
However, persistent affordability challenges and the threat of further regulatory changes could quickly undermine Zillow’s path to sustained growth and higher margins.
Looking at Zillow Group’s valuation through the lens of its price-to-sales ratio reveals a less optimistic picture. The shares trade at 7.3 times sales, far higher than the US real estate industry average of 2.9 and the peer average of 3.8. Even compared to its fair ratio of 4.2, Zillow’s valuation looks stretched. This gap could signal potential risk if the business does not deliver the strong growth investors expect. Could the market be getting ahead of itself, or is something bigger at play?
If you think there is more to the story or want to test your own conclusions, you can dive into the numbers and build your narrative in just a few minutes with Do it your way.
A good starting point is our analysis highlighting 3 key rewards investors are optimistic about regarding Zillow Group.
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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.
Valuation is complex, but we're here to simplify it.
Discover if Zillow Group might be undervalued or overvalued with our detailed analysis, featuring fair value estimates, potential risks, dividends, insider trades, and its financial condition.
