Zillow's Mixed Quarter: Analysts See Strong Execution But Caution On 2025 Guidance

Zillow Group, Inc. (NASDAQ: Z) reported mixed results for the fourth quarter of 2024, with revenue exceeding expectations but guidance for the first quarter of 2025 falling short of analyst estimates. The company's shares fell after the earnings release, reflecting investor concerns about the slower growth outlook. However, analysts remain optimistic about Zillow's long-term growth prospects, citing strong execution across its Touring, Mortgage, and Rentals segments.

Zillow's fourth-quarter revenue of $554 million was up 17% year over year, outpacing the residential real estate industry's year-over-year total transaction value growth of 13% according to NAR and 15% according to industry data tracked and estimated by Zillow. The company's For Sale revenue increased 15% year over year to $428 million, while Residential revenue grew 11% to $387 million. Mortgages revenue surged 86% to $41 million, and Rentals revenue increased 25% to $116 million.

However, Zillow's first-quarter guidance for 2025 was weaker than expected, with revenue and EBITDA at the high end, falling 2% and 12% short of consensus estimates. The company expects 2025 revenue growth in the low to mid-teens, along with continued Adjusted EBITDA margin expansion and full-year GAAP profitability.

Analysts have mixed reactions to Zillow's long-term growth potential versus short-term challenges. Piper Sandler's Thomas Champion cut the price forecast from $93 to $90 while retaining an Overweight rating, citing the company's cautious guidance and conservative approach. Cantor's Deepak Mathivanan raised the price forecast from $62 to $70 while reiterating a Neutral rating, acknowledging the company's execution but also noting the challenges in the broader market. JP Morgan's Dae K Lee reiterated an Overweight rating and price forecast of $93, highlighting Zillow's strong execution and long-term growth prospects.

Zillow's cautious guidance for 2025 reflects the company's anticipation of a softer housing market, conservative approach to forecasting, and planned investments in growth initiatives. Analysts' more optimistic projections may be influenced by their focus on long-term growth potential and market conditions.

In conclusion, Zillow's mixed quarterly performance reflects the broader real estate market trends, with the company successfully executing its strategy and outpacing industry growth. However, the company's cautious guidance and analysts' mixed reactions highlight the challenges and uncertainties in the real estate market, which may impact Zillow's long-term growth prospects. Investors should closely monitor the company's progress and assess the potential impact of market conditions on its future performance.