Zillow Stock Near 52-Week Lows: Is It Time to Buy the Dip?

Zillow's Z and ZG shares are trading near $30, just above 52-week lows of $29, as the Fed's 25bp rate hike to 3.75%-4.00% and a 6.95% average 30-year mortgage rate pressure housing affordability. Q2 revenue rose 18% to $772 million, led by 31% rentals growth and 75% mortgage-revenue growth, while management forecasts 2026 revenue of $2.92-$2.96 billion and adjusted EBITDA of $730-$760 million. Valuation has fallen to roughly 13x forward earnings and below 2x forward sales, but slightly reduced FY26-FY27 EPS estimates and elevated mortgage rates support a near-term Hold stance.

Analysis

Zillow is increasingly a mix-shift rather than a pure transaction-volume equity: Rentals can retain traffic and monetization when purchase affordability freezes, while mortgage growth is highly rate-sensitive and unlikely to deserve a durable multiple until gain-on-sale margins and attach rates are disclosed. The relevant near-term variable is not the policy rate but the 10-year Treasury/mortgage spread; a normalization in that spread can improve affordability before meaningful Fed easing and would create upside to consensus revenue assumptions.

At the current valuation, the market appears to be assigning limited value to Zillow’s housing-superapp conversion opportunity, but estimates have begun to drift lower and a cheap earnings multiple is not sufficient protection if residential-agent advertising budgets weaken. CoStar (CSGP) is the cleaner competitive comparator: a prolonged low-turnover market is more damaging to transaction-linked lead generation than to subscription-heavy real-estate data. Redfin (RDFN) remains the higher-beta negative read-through because its brokerage and mortgage fixed-cost base has materially greater operating leverage.

Over the next 1-3 months, Zillow needs evidence that Rentals growth is translating into consolidated EBITDA rather than being offset by higher customer-acquisition costs. Over 6-18 months, falling mortgage rates would unlock both transaction volumes and mortgage attach, producing positive operating leverage; conversely, another leg higher in long rates risks a guidance reset despite resilient site traffic. The contrarian view is that a housing thaw need not wait for broad affordability normalization: pent-up household formation and eventual lock-in release can cause listing inventory to recover faster than closed-sale volumes.

There is no fundamental distinction sufficient to justify a persistent material spread between Z and ZG; any unusually wide discount in the non-voting class is a liquidity/event-driven relative-value opportunity, not a directional housing call.

Key Decisions for Investors

• Watch, rather than immediately buy, Z: initiate a 6-12 month long only after management confirms stable or rising adjusted-EBITDA guidance and mortgage-rate spreads tighten; downside is a housing-led estimate reset, while a normalization toward peer marketplace multiples offers asymmetric upside from depressed expectations.
• Preferred expression for a housing-rate easing signal: long Z / short RDFN in equal dollar amounts for 3-6 months. Zillow’s asset-light lead-generation and Rentals mix should preserve margins better; exit if Zillow cuts EBITDA guidance or RDFN’s brokerage gross margin improves materially faster.
• Use CSGP as the higher-quality defensive substitute if housing turnover remains depressed: long CSGP versus short Z only if Zillow’s residential revenue decelerates while CSGP subscription retention remains intact. This pair reverses quickly if mortgage rates fall materially and transaction advertising rebounds.
• Set an alert on the Z-versus-ZG price spread. If the economically equivalent share classes diverge beyond normal liquidity differences, buy the discounted class and short the premium class, subject to borrow availability; close on spread normalization rather than a view on housing.