Zillow Group, Inc. (NASDAQ: Z) shares are trading higher after Wedbush upgraded the stock from Neutral to Outperform and raised its price target from $50 to $80.
The analyst Jay McCanless writes they see a potential boost from lower mortgage rates for Zillow's core brokerage business.
The S&S revenues, included in the Residential revenue line, have contributed to faster revenue growth compared to the national existing home market in recent quarters, adds the analyst.
McCanless maintained third-quarter estimates, which are at the high end of Zillow's guidance for AEBITDA and revenue, as lower rates may not benefit buyers until the fourth quarter.
For FY25, the analyst raised the revenue estimate to $2.5 billion from $2.4 billion and AEBITDA estimate to $679 million from $600 million.
Segment-wise, the analyst increased FY25 growth estimates for Residential revenue to 17% and Rental revenue to 10%, driven by strong rental demand and high construction activity.
On the other hand, McCanless lowered the FY25 opex/sales target to 77% due to higher revenue.
Mortgage revenue is projected to grow 5% year-over-year, though upside risk remains if Residential revenue grows as expected, adds the analyst.
Investors can gain exposure to the stock via Global X PropTech ETF (NASDAQ: PTEC) and Jacob Funds Inc. Jacob Forward ETF (NASDAQ: JFWD).
Price Action: Z shares are up 4.84% at $62.63 at the last check Monday.