Zillow stock price target raised to $78 by Goldman Sachs on strong Q3

Goldman Sachs raised its price target for Zillow Group (ZG) to $78.00 from $74.00, while maintaining a Neutral rating, following the company's strong third-quarter earnings. Zillow reported Q3 EBITDA of $165 million and revenue of $676 million, both exceeding analyst expectations, driven by 7% growth in Residential revenue and a significant 62% increase in Rentals revenue, with further acceleration anticipated. The company also introduced Zillow Pro, an AI-powered agent suite, and provided Q4 guidance in line with expectations, projecting consistent growth into 2026, as analysts anticipate profitability this year despite current overvaluation concerns.

Analysis

Zillow Group (ZG) reported robust third-quarter results, with EBITDA of $165 million and revenue of $676 million, both surpassing Goldman Sachs and consensus estimates. This strong performance, including adjusted EPS of $0.44, prompted Goldman Sachs to raise its price target to $78.00 from $74.00, maintaining a Neutral rating. The stock saw a modest increase post-earnings, despite a recent 7.43% weekly decline.

Growth was primarily driven by a 7% year-over-year increase in Residential revenue to $435 million, outperforming the industry's 5% transaction value growth. The Rentals segment demonstrated exceptional strength, with multifamily revenue surging 62% year-over-year and projected to accelerate beyond 45% in Q4 2025. Zillow also unveiled Zillow Pro, an AI-powered agent suite, slated for a 2026 rollout with modest initial revenue contribution.

Management provided Q4 guidance in line with expectations, anticipating consistent revenue growth and EBITDA margin expansion through 2026. While Zillow has not been profitable over the last twelve months, InvestingPro analysis projects profitability this year. However, InvestingPro's Fair Value assessment suggests the stock is currently overvalued, contrasting with analyst price targets ranging from $66 to $105.

Key Decisions for Investors

• Closely monitor Zillow's path to sustained profitability this year, as InvestingPro's overvaluation assessment contrasts with strong Q3 performance and a raised price target.
• Evaluate the sustainability of Zillow's robust Rentals segment growth and Residential revenue outperformance against broader real estate market dynamics.
• Assess the long-term revenue potential and market adoption of the Zillow Pro AI suite, which is expected to roll out in 2026.
• Consider the implications of Goldman Sachs' maintained Neutral rating and recent stock decline, suggesting that current valuation may already reflect positive earnings news.