Zillow Group is experiencing a decline in share prices, with both Class A (ZG) and Class C (Z) shares trading around $30, close to their 52-week lows of $29. This drop coincides with the Federal Reserve’s recent increase of its benchmark interest rate by 25 basis points, now at 3.75%-4.00%, contributing to climbing mortgage rates, which currently average 6.95%—up from 6.76% the previous week and 6.26% a year ago. As borrowing costs rise, concerns about housing affordability may impact Zillow’s home-buying and mortgage operations.
In Q2, Zillow reported an 18% revenue increase to $772 million, driven by a 75% surge in mortgage revenue and a 31% increase in rentals revenue. Despite a challenging housing market, management forecasts 2026 revenue between $2.92-$2.96 billion, equating to a 13% growth. Analysts project earnings per share of $2.22 this year, a 35% increase, but show signs of declining growth expectations for FY26 and FY27 due to the current housing environment.
The company’s shares now exhibit a more attractive valuation at roughly 13 times forward earnings. However, without improvements in interest rates or the housing market, Zillow’s near-term upside may be limited. Currently, both shares hold a Zacks Rank #3 (Hold), indicating a cautious approach for investors.
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