Beast Finance's Core Viewpoints:

(1) Wedbush has upgraded Zillow's rating to 'Outperform' with a target price of $80.

(2) Strong second-quarter results with continued double-digit revenue growth.

(3) Beast Finance's Technical Analysis on Zillow Stock: Technically, if Zillow's share price can break through $61.15, it has the potential to rise to $78. Bearish investors can establish short positions near $60 and set a small stop loss at $61.80.

Beast Finance has learned that Wall Street investment bank Wedbush has recently upgraded Zillow's (Z) rating from 'Neutral' to 'Outperform' and significantly increased its target price from the previous $50 to $80. The upgrade is based on Wedbush's confidence in Zillow's Software & Services (S&S) plan, which has played a crucial role in driving the company's revenue growth and has led the U.S. residential market for several consecutive quarters.

In addition, Wedbush has also increased Zillow's fiscal year 2025 revenue forecast from $2.4 billion to $2.5 billion and its adjusted EBITDA forecast from $600 million to $679 million.

Wedbush analysts believe that with declining mortgage rates, Zillow's strategic positioning, particularly in its Software & Services (S&S) plan and core brokerage services, positions it well to capitalize on the current favorable trends in the U.S. housing market and reap significant benefits.

Zillow's Revenue Growing at Double-Digit Rates

As Goldman Sachs (GS) recently emphasized at the Communications + Technology Conference, Zillow has been strategically strengthening its market share and services.

Zillow's Chief Financial Officer Jeremy Hofmann also stated that despite challenges in the U.S. real estate market, Zillow remains committed to achieving double-digit revenue growth and moderate EBITDA margin expansion.

Indeed, Zillow's revenue has been growing at double-digit rates. In the second quarter of 2024, Zillow's revenue increased by 13% to $572 million, surpassing the company's guidance and outpacing the growth rate of the U.S. residential real estate market.

This growth is primarily attributed to Zillow's strategic investments over the past two years, which are now significantly contributing to the company's revenue.

Zillow's Second-Quarter Financial Results

In the second quarter of 2024, Zillow delivered particularly strong results, with revenue exceeding expectations at $572 million, up 13% year-over-year.

Residential contributed the most to Zillow's overall performance, with revenue growing 8% year-over-year to $409 million in the second quarter, significantly outpacing the 3% growth rate of the overall U.S. residential real estate market.

Additionally, Zillow's Rentals segment also performed strongly, with revenue growing 29% year-over-year to $117 million, primarily driven by a 44% increase in multifamily revenue.

However, the company incurred a net loss of $17 million (slightly improved from a net loss of $35 million in the same period last year).

Recent Challenges Facing Zillow Stock

Beast Finance believes that in the current market environment, Zillow faces both headwinds and tailwinds.

On the positive side, the company benefits from declining mortgage rates, which are expected to drive increased homebuyer activity.

Furthermore, Zillow's continually enhanced market strategy, including expanding live tours and comprehensive mortgage services, is expected to bring sustained growth opportunities.

However, the company also faces challenges from the downturn in the U.S. real estate market and the potential slowdown in the housing market, particularly for first-time homebuyers struggling in the current economic environment.

While the ongoing settlement with the National Association of Realtors (NAR) may also bring some uncertainty to Zillow's revenue growth, Zillow believes it is well-prepared to navigate these changes.

Beast Finance believes that Zillow's ability to expand its EBITDA margins while increasing revenue from its residential business indicates its potential to achieve its long-term financial goals.

Moreover, Zillow's leading position in search traffic and app usage provides a solid foundation for its continued growth.

Having reviewed Zillow's fundamentals and market prospects, let's now analyze from a technical perspective whether Zillow's stock price will encounter potential resistance and affect its short-term performance following Wall Street's rating upgrade and given its strong fundamentals.

Technical Analysis of Zillow Stock

Since Zillow's share price declined from over $200 to below $30 between early 2021 and the end of 2022, it has hovered between $40 and $60.

Currently, the stock is still trading within this range, providing opportunities for both bulls and bears to enter the market.

Technically, Beast Finance believes that bullish investors in Zillow stock must wait for a decisive break, i.e., a closing price above $61.15. If this level is breached, the stock has the potential to rise to $78.

Bearish investors can establish short positions near $60 and set a small stop loss at $61.80. If Zillow's share price falls back from its current level, it may drop to $40 again in the coming months.

For more detailed fundamental and technical analysis of Zillow stock or for 1-on-1 analysis, please follow Beast Finance.