Zillow (Z) Down 1.7% Since Last Earnings Report: Can It Rebound?

Core Viewpoint - Zillow Group's recent earnings report shows mixed results, with adjusted EPS missing estimates but total revenues exceeding expectations, indicating potential growth despite rising costs [2][3]. Financial Performance - The fourth-quarter 2025 adjusted EPS was 39 cents, below the Zacks Consensus Estimate of 42 cents, but showed significant year-over-year growth [2]. - Total revenues reached $654 million, surpassing the Zacks Consensus Estimate of $649.8 million, reflecting an 18.1% year-over-year increase [3]. - For-sale revenues increased by 11% to $475 million, while residential revenues grew by 8% to $418 million, supported by agent and software offerings [4]. - Mortgage revenues rose by 39% year-over-year to $57 million, driven by a 67% increase in purchase loan origination volume to $1.5 billion [4]. - Rental revenues surged by 44.8% year-over-year to $168 million, primarily due to a 63% increase in multifamily revenue [4]. Cost and Margin Analysis - Adjusted EBITDA margin improved by 260 basis points to 23% of revenues, amounting to $149 million, attributed to revenue growth and cost discipline [5]. - Total operating expenses and cost of revenues grew by 7% year-over-year to $665 million, influenced by increased lead acquisition costs and higher legal expenses [6]. Balance Sheet and Shareholder Actions - At the end of Q4 2025, Zillow had $1.3 billion in cash and investments, down from $1.4 billion in the previous quarter [7]. - The company repurchased 3.4 million shares for $232 million during the fourth quarter [7]. Future Outlook - For Q1 2026, Zillow expects total revenues between $700-710 million and adjusted EBITDA between $160 and $175 million, with for-sale revenues projected to grow slightly above 11% [8]. - Rental revenues are anticipated to rise around 40% year-over-year, driven by accelerated multifamily revenue growth [8]. - Management projects mid-teens revenue growth year-over-year and rental revenue growth of around 30% for 2026, with expectations for adjusted EBITDA margin expansion [10]. Market Sentiment and Estimates - Since the earnings release, there has been a downward trend in fresh estimates, with the consensus estimate shifting down by 6.25% [11]. - Zillow currently holds a Zacks Rank 3 (Hold), indicating an expectation of in-line returns in the coming months [13].