CoStar Group, Inc. (CSGP), headquartered in Washington, D.C., commands the real estate industry with its advanced analytics, market intelligence, and online platforms. Boasting a $33.6 billion market cap, CoStar empowers professionals across the Americas, Europe, and Asia with critical tools for leasing, selling, and property analysis. From tenant insights to marketing solutions and industry trends, its offerings shape strategic decisions in a competitive global landscape. CoStar stands as a linchpin in modern real estate transactions, blending data precision with market foresight.
Shares of CoStar have considerably underperformed the broader market over the past 52 weeks. CSGP has declined 2.7% during this period, while the S&P 500 Index ($SPX) returned 31.8%. Moreover, in 2024, CSGP shares plunged 6.2%, lagging behind SPX's 25.8% gain on a YTD basis.
Zooming in further, CSGP has also underperformed the US Real Estate iShares ETF (IYR), which has returned 24.2% over the past 52 weeks and gained 12.5% on a YTD basis.
In 2024, CoStar Group faced a turbulent year, with its stock faltering under relentless rate hikes and a sluggish real estate market. As demand for commercial properties waned, CoStar’s growth narrative unraveled, sending investors scrambling. Mounting competition in digital property marketplaces compressed margins, while lackluster earnings reports only deepened concerns.
The company’s disappointing Q3 earnings report on Oct. 22 exemplified these struggles. Shares of the leading commercial real estate listing platform slid 5.3% in the subsequent trading session. Despite 11% revenue growth to $692.6 million, the top line fell short of expectations.
The company’s bottom-line challenges loomed large. Adjusted EBITDA plunged to $76 million from $112 million in the year-ago quarter, reflecting heightened sales and marketing expenses. While adjusted EPS of $0.22 beat the forecasts of $0.18, it still marked a 26.7% annual decline. CoStar’s future guidance further stoked fears, projecting a slowdown in Q4 revenue growth to 9% and signaling the likely end of its celebrated double-digit revenue streak.
For the current fiscal year, ending in December, analysts project CoStar’s EPS to decline 51.4% year over year to $0.51. Moreover, the company's earnings surprise history is solid, as it topped the consensus estimates in each of the last four quarters.
The overall consensus is a “Moderate Buy” among the 12 analysts covering CSGP stock. That’s based on seven “Strong Buy” ratings, two “Moderate Buys,” and three “Holds.”
The overall configuration is slightly less bullish than three months ago when it had eight “Strong Buy” ratings and three “Moderate Buys.”
Needham remains bullish on CSGP stock, reiterating a “Buy” rating with a $100 price target last week. Following discussions with Investor Relations head Richard Simonelli, the firm highlighted CoStar’s revamped sales strategies and a favorable commercial real estate environment as catalysts for growth.
Declining interest rates are poised to drive bookings in fiscal 2025, while consistent $1 billion investments in Homes.com aim to strengthen operating leverage. Needham emphasizes CoStar’s dominant market position and its capacity to harness strategic shifts, projecting robust revenue acceleration and profitability gains. These factors underpin the firm’s optimistic outlook, viewing CoStar as well-positioned to thrive amid shifting market dynamics and rising industry demand.
The mean price target of $90.91 for CSGP implies an upside potential of 10.9%. The Street-high target price of $103 suggests the stock could rally as much as 25.7% from the current levels.
