Here's Why Zillow (ZG) is an Enticing Investment Option Now
Shares of Zillow Group, Inc. ZG have surged 84.1% over the past year, driven by improved market demand across its portfolio on the back of a flexible business model and solid cash flow. Earnings estimates for the current fiscal have increased 13.6% since July 2023, implying robust growth potential. With healthy fundamentals, this Zacks Rank #2 (Buy) stock appears to be a solid investment option at the moment. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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Growth Drivers
Headquartered in Seattle, WA, Zillow provides real estate and home-related brands on the web and mobile. The company focuses on the home lifecycle, which includes renting, buying, selling, financing and home improvement. Its portfolio of consumer brands consists of Zillow, Trulia, StreetEasy and HotPads, Naked Apartments, RealEstate.com and OutEast.co. In addition, Zillow offers a complete suite of marketing software and technology solutions to aid real estate, rental and mortgage professionals make the best use of business opportunities and connect with millions of consumers.
Zillow’s growing user base and visitors are the primary factors that help it generate significant revenues. The company is witnessing solid momentum in rental revenues, which is a tailwind as users are increasingly shifting to the Internet and mobile devices for real estate information. Management noted that the high visitor rate was backed by improvements in product lines, which increased its app downloads. Monthly unique rental visitors rose 11% year over year to 30 million during the third quarter of 2023. The increase in visitors is a positive as it enhances the probability of generating leads for agent advertisers.
The acquisition of Trulia has strengthened Zillow’s competitive position. The acquisition is a strategic fit as both companies offer mobile and web solutions that give important information about homes to users. Further, with Trulia in its portfolio, Zillow’s scale of business has increased manifold with new listings and expanded reach, which, in turn, will offer significant long-term benefits.
Zillow recently inked an agreement to acquire Follow Up Boss with an initial payment of $400 million in cash and up to $100 million potential cash earnout. Follow Up Boss is a leading CRM applications provider. By integrating these advanced CRM features Zillow Group is aiming to drive deeper engagement between real estate agents and customers. This will likely enable agents to deliver a greater customer experience and accelerate deal closings.
The stock has a long-term earnings growth expectation of 4.7%. It delivered an earnings surprise of 104.3%, on average, in the trailing four quarters. It has an average brokerage recommendation (ABR) of 2.1 on a scale of 1 to 5 (Strong Buy to Strong Sell). ABR is the calculated average of actual recommendations made by brokerage firms and portends the future potential of the stock.
Other Key Picks
United States Cellular Corporation USM, sporting a Zacks Rank #1, is the fourth largest full-service wireless carrier in the United States. The company provides a range of wireless products and services, and a high-quality network to increase the competitiveness of local businesses and improve the efficiency of government operations.
U.S. Cellular has taken concrete steps to accelerate subscriber additions and improve churn management. The company aims to offer the best wireless experience to customers by providing superior quality network and national coverage. It is well-positioned to support the investment required for network enhancements, including the deployment of 5G technology. The company is well-positioned for continued demand for broadband.
InterDigital, Inc. IDCC: Headquartered in Wilmington, DE, InterDigital is a pioneer in advanced mobile technologies that enable wireless communications and capabilities. The company engages in designing and developing a wide range of advanced technology solutions, which are used in digital cellular as well as wireless 3G, 4G and IEEE 802-related products and networks.
This Zacks Rank #1 stock has a long-term earnings growth expectation of 17.4% and has surged 122.6% over the past year. A well-established global footprint, diversified product portfolio and ability to penetrate different markets are key growth drivers for InterDigital. Apart from a strong portfolio of wireless technology solutions, the addition of technologies related to sensors, user interface and video to its offerings is likely to drive considerable value, given the massive size of the market it offers licensing technologies to.
Arista Networks, Inc. ANET, carrying a Zacks Rank #2, is likely to benefit from strong momentum and diversification across its top verticals and product lines. The company has a software-driven, data-centric approach to help customers build their cloud architecture and enhance their cloud experience. Arista has a long-term earnings growth expectation of 20.4% and delivered an earnings surprise of 12%, on average, in the trailing four quarters.
It holds a leadership position in 100-gigabit Ethernet switching share in port for the high-speed datacenter segment. Arista is increasingly gaining market traction in 200- and 400-gig high-performance switching products and remains well-positioned for healthy growth in data-driven cloud networking business with proactive platforms and predictive operations.
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