Piper Sandler analyst Thomas Champion has upgraded Zillow Group stock (ticker: Z) to Overweight from Neutral, citing confidence in the future of the housing market. This positive outlook has led him to increase his price target on the stock to $62 from $42, indicating a potential upside of more than 20% from the current market price.
As of Tuesday trading, Zillow stock is up 9.6% to $51.08, with a year-to-date gain of 63%. Champion’s upgrade also comes with raised estimates for revenue, gross profit, and earnings before interest, taxes, depreciation, and amortization through 2024.
Champion highlights three key factors for Zillow’s promising future: continued Premier Agent share gains, product optionality and new initiatives, and a bottoming in the housing macro with sequential improvements through 2024. Zillow’s Premier Agent platform offers support through a trusted network of real estate professionals.
In terms of valuation, Champion notes that Zillow stock is currently trading at about a 25% discount to the 2015-2018 period based on enterprise value/next-12-months Ebitda.
While higher housing costs and mortgage rates have caused a slowdown in existing-home sales, Champion believes the situation is poised to improve. The stabilization of mortgage rates at current levels should spur demand, despite rates still being higher than they were a year ago.
Champion also suggests that Fannie Mae’s estimate for existing-home sales in 2024, which is about 20% below the historical average, may be surpassed.
Overall, this upgrade by Piper Sandler has bolstered confidence in Zillow Group stock and indicates a positive outlook for the company’s performance in the coming years.
