Key Stats for Zillow Group Stock
- Price Change: -18.85%
- Current Price: ~$44
- Street Target: $86
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What Happened?
Zillow Group, Inc. (ZG) crashed 18.85% to close near $44.16 on Wednesday, suffering a massive selloff as investors reacted negatively to the company’s first-quarter profit outlook and rising legal costs.
The real estate technology giant actually beat top-line expectations for the fourth quarter, delivering $654 million in revenue, an 18% year-over-year increase, and expanded its EBITDA margins by 260 basis points.
Furthermore, Zillow reported $23 million in net income for the full year, delivering on its promise of GAAP profitability.
However, the market looked past the Q4 beat and focused entirely on the soft guidance for Q1 2026.
Management forecasted Q1 EBITDA to be between $160 million and $175 million, representing a 24% margin at the midpoint.
This disappointed investors who were expecting more operating leverage, especially given the strong revenue growth projected for the quarter.
The profit squeeze is primarily driven by a significant increase in variable costs, as Zillow ramps up hiring for rental salespeople and loan officers.
Adding fuel to the fire, CFO Jeremy Hofmann disclosed that elevated legal expenses will create an approximate 200 basis points headwind to EBITDA margins in Q1 and a 100 basis points headwind for the full year.
In a housing market that continues to “bounce along the bottom” due to high interest rates, investors were unforgiving of the margin pressure, leading to the sharp double-digit decline.
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Is Zillow Group Undervalued Today?
During the earnings call, CEO Jeremy Wacksman defended the company’s aggressive investment strategy, framing it as a necessary step to dominate the entire real estate transaction.
He stated: “Zillow’s Q4 and full year 2025 performance reflect excellent execution and meaningful progress across the business… In Q4, total revenue increased 18% year-over-year.”
Wacksman also highlighted the explosive growth in their newer segments: “In Rentals, Q4 revenue was up 45% year-over-year, driven by 63% growth in multifamily revenue… Purchase loan origination volume accelerated to 67% year-over-year growth in Q4.”
Addressing the margin concerns, CFO Jeremy Hofmann emphasized the long-term vision: “As we look ahead, we are confident in our mid-cycle targets for $5 billion in revenue and 45% EBITDA margins in a normalized housing market. 2025 showed good progress towards these targets.”
Read the full Zillow Group Transcript on TIKR to see the 2026 Roadmap >>>
Relying on the more grounded Street Consensus, analysts still see a path to a significant recovery if Zillow can weather the current housing storm.
- Street Target: $86
- Current Price: ~$44
- Potential Upside: +94.8%
Valuation Deep Dive
The investment case for Zillow Group is a battle between long-term platform dominance and short-term macro headwinds.
With the stock trading at a depressed ~$44, the market is severely penalizing the company for sacrificing near-term profits to fund future growth. The $86 Street Target implies that analysts believe the core “super app” strategy will ultimately pay off.
- The Margin Squeeze: Aggressive hiring at Zillow Home Loans and Rentals, combined with the 200 bps Q1 headwind from legal expenses, is dragging down near-term EBITDA. Investors want to see proof that these investments will yield high-margin revenue before rewarding the stock.
- The Housing Macro: Zillow’s revenue outperformed the broader housing market by 1,300 basis points in 2025. If the macro environment normalizes (from 4.1 million existing home sales to 6 million), Zillow’s management estimates they could generate mid-to-high 30% EBITDA margins.
- The Value Gap: The $86.04 target reflects the belief that Zillow’s integration of search, touring, financing, and agent collaboration (via Zillow Pro and Follow Up Boss) will create an insurmountable moat in the residential real estate market.
If Zillow can navigate the elevated legal costs and prove that its heavy variable investments are driving durable market share gains, the path back to $86.04 offers massive upside for patient investors.
Conclusion: A fixer-upper with great bones. With nearly 95% upside potential to the Street target, Zillow Group offers a high-risk, high-reward setup for investors willing to look past the near-term profit squeeze and bet on a housing market recovery.
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Disclaimer:
Please note that the articles on TIKR are not intended to serve as investment or financial advice from TIKR or our content team, nor are they recommendations to buy or sell any stocks. We create our content based on TIKR Terminal’s investment data and analysts’ estimates. Our analysis might not include recent company news or important updates. TIKR has no position in any stocks mentioned. Thank you for reading, and happy investing!
