Shaina Mishkin

Houses are still selling more slowly than usual, but shares of home listings website Zillow Group are back near levels not seen since the boom days of 2021.

Analysts are betting that signs of life in the housing market in the fourth quarter will translate into better-than-expected results for the company, which are set for release Tuesday after the market close.

Zillow class C stock is having its best start to the year since 2023, according to Dow Jones Market Data. The stock was up 18.8% so far this year as of Monday's close, outperforming many other companies connected to the housing market. At $87.97, it was the highest close since early November 2021.

Analysts expect Zillow will report adjusted earnings before interest, tax, depreciation, and amortization, or Ebitda, of $108 million, according to consensus estimates compiled by FactSet, exceeding the $105 million top end of the company's guidance range. They are looking for residential segment revenue of $387 million, and $547 million in total revenue, surpassing the company's upper guidance of $374 million and $540 million, respectively.

"Z has delivered upside in the past 12 quarters, a track record we see continuing in 4Q as revenue benefits from a stronger housing market and product expansions," a team of Jefferies analysts led by John Colantuoni wrote in a Feb. 3 note. They increased their price target to $110 from $105 and reiterated a Buy rating.

The last time Zillow's share price was this high, mortgage rates were hovering around 3%, the pace of existing-home sales reached above six million, and home sale prices were still logging double-digit annual increases as buyers duked it out in bidding wars.

Zillow, on the other hand, was on the verge of scrapping its Zillow Offers program, through which the company bought and sold homes. It ended 2021 down 50%.

Both look very different today. The broader housing market slumped along at a slower-than-usual pace through 2024 as relatively high mortgage rates and home prices kept buyers out of the market. Mortgage rates today are more than double 2021 levels, and existing home sales, as of the most recent reading from December, were about a third lower.

Zillow, meanwhile, has reoriented itself around its "housing super app" services strategy. In recent quarters, it has promoted its growth in its rentals and mortgages businesses, as well as the services it offers to agents and buyers, and named former chief operating officer Jeremy Wacksman to CEO.

Investors should keep their eyes on the company's outlook. As of Friday, analysts expected Zillow to report adjusted Ebitda of $158 million on $938 million in revenue in its first quarter, which will end in March.

But the company's first quarter outlook could be softer than expected, the Jefferies analysts wrote. "We see some risk of 1Q guidance falling slightly below consensus, driven by a slower housing market YTD [...] and Z's tendency to guide conservatively," they wrote.

Political developments could represent additional headwinds. "We remain cautious on the housing market outlook in the near term, given the Fed has paused its rate cutting cycle and home prices continue to increase, with the potential for tariffs to further exacerbate affordability issues," Canaccord analyst Maria Ripps wrote in a Feb. 6 earnings preview. She rates Zillow Class A shares Hold, with a $86 price target.

Write to Shaina Mishkin at shaina.mishkin@dowjones.com

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February 11, 2025 02:00 ET (07:00 GMT)

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