Zillow Group Z is well-poised to benefit from its high brand value and technological advancements to enhance customer digital experience. Strategic alliances to expand its portfolio are also encouraging. The current stage of the U.S. housing cycle presents an appealing entry point, unlocking a substantial addressable market and significant growth potential.

However, macroeconomic uncertainty, higher interest rates and inflationary pressures impact Zillow Group’s performance. Elevated sales and marketing spending will keep its margins under pressure.

In early April, Zillow announced its new listing standards aimed at real estate transparency, where all information will be easily accessible without any barriers and bias. The move will strengthen consumer trust and confidence in the company’s brand.

What’s Aiding Z?

Zillow has a high brand appeal and has emerged as the leading brand with the largest and most engaged audience in the residential real estate market. Zillow Group’s housing super app is steadily increasing its traffic position. In the fourth quarter of 2024, the company witnessed average monthly unique users totaling 204 million and visits aggregating 2.1 billion, growth of 3% for both metrics year over year. As per management, the company is on track to achieve its target of a 6% share of customer transactions by the end of 2025.

Zillow Group provides several marketing software and technology solutions for the real estate industry. Each of these products and solutions is designed to yield incremental revenue opportunities per transaction. At the same time, these are focused on improving the company’s consumer funnel by capturing consumer demand and connecting the same to its partner network.

Also, Zillow Group enters into strategic alliances with varied entities to expand its platform. In April 2025, Zillow Group partnered with HomeServices of America to offer its exclusive AI-powered listing experience, Showcase. This collaboration will aid in expanding Zillow Showcase’s reach, generating higher revenues for the company.

Zillow Group is likely to benefit from favorable industry dynamics. The U.S. housing industry is poised at an attractive cyclical entry point. With housing turnover near 40-year cyclical lows at present, there is a 50% upside potential at 6 million home sales in normalized annual transactions. This positions Zillow Group to tap into a significant market with substantial growth potential.

Zillow Group has a healthy balance sheet position with ample liquidity. The company exited the fourth quarter with $1.9 billion in cash and investments. At the end of the fourth quarter of 2024, the total debt was $563 million, and Z had a $381 million share repurchase authorization. As such, with operational efficiency, cash flow management strategies and strength in the balance sheet, Zillow is well-poised to pursue its future expansions for long-term growth.

What’s Hurting Z?

Amid the current uncertain economic conditions and market factors like low housing inventory, volatility in mortgage interest rates, home price fluctuations, inflationary conditions and rental occupancy rate fluctuations, homebuyers and renters are either pausing or reconsidering their decisions, causing a delay in the closing timeline for transactions. This is likely to impact the company’s revenues.

Zillow is spending heavily on sales and marketing to remain competitive. In the fourth quarter and third quarter of 2024, sales and marketing expenses increased 22.4% and 32.3%, respectively, year over year. This sustained elevated investment is likely to keep its margins under pressure in the near term.

Shares of this Zacks Rank #3 (Hold) company have fallen 1.5% over the past six months, narrower than its industry’s decline of 13.3%. Analysts seem bearish on this stock, with its Zacks Consensus Estimate for 2025 earnings per share (EPS) having been revised southward by 5.6% over the past two months.

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Stocks to Consider

Some better-ranked stocks from the broader real estate industry are Newmark Group NMRK and Green Brick Partners GRBK. While NMRK sports a Zacks Rank of #1 (Strong Buy), GRBK carries a Zacks Rank of #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank stocks here.

The Zacks Consensus Estimate for Newmark Group’s 2025 earnings per share (EPS) has been revised upward by 3.6% to $1.45 per share over the past two months.

The Zacks Consensus Estimate for Green Brick Partners’ 2025 EPS has been revised marginally northward to $8.61 per share over the past two months.

Note: Anything related to earnings presented in this write-up represents FFO, a widely used metric to gauge the performance of REITs.

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This article originally published on Zacks Investment Research (zacks.com).

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