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Zillow Group (NASDAQ:Z) got a big boost as investment firm Wedbush upgraded its rating to “Outperform” from “Neutral” and raised its price target from $50 to $80. This move reflects growing confidence in Zillow's software and services (S&S) segment, a major driver of the company's revenue. Zillow has outpaced the national housing market for several quarters now.

Wedbush adjusted its revenue projection for Zillow in FY25, raising it to $2.5 billion from the previous $2.4 billion estimate.

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Their forecast for adjusted earnings before interest, taxes, depreciation and amortization (AEBITDA) was also lifted to $679 million from $600 million. "Zillow's unique positioning, especially in the S&S offerings and core brokerage services, puts them in a prime spot to benefit from the current housing trends," the firm explained.

While mortgage rates have been dropping, Wedbush believes any further drops could play right into Zillow's hands. The company's approach seems to be paying off, especially in a housing market where many other players struggle to keep up.

During the recent Goldman Sachs Communacopia + Technology Conference, Zillow's CFO Jeremy Hofmann expanded the company's goal for double-digit revenue growth and slightly increased EBITDA margins.

Despite facing a challenging housing market, Zillow has grown consistently. In Q2 2024, for instance, the company's revenue jumped 13% year-over-year to $572 million – exceeding expectations and beating the broader real estate market.

"This growth has been fueled by strategic investments made over the last two years," Hofmann noted, adding that these investments are now starting to pay off quickly.

Breaking it down further, the residential segment – critical to Zillow's overall success – grew 8% year-over-year, bringing in $409 million. This outpaced the general residential real estate market, which saw only a 3% uptick. Additionally, Zillow's rentals segment performed exceptionally well, with revenue climbing 29% year-over-year due to a massive 44% boost in multifamily revenue.

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Even though the company did report a net loss of $17 million this quarter, it's an improvement from the $35 million loss in the same period last year. Zillow is turning things around, though it still faces some near-term challenges. The housing market has been fairly flat and there's concern over a potential slowdown, particularly for first-time buyers grappling with current economic conditions.

Another wrinkle in Zillow's path is the ongoing settlement with the National Association of Realtors (NAR). While this could stir up some uncertainty, Zillow remains confident it can handle any shifts the settlement may bring. "Zillow's top-of-funnel dominance, including its lead in search traffic and app usage, provides a solid base for continued growth," Wedbush remarked.

Looking ahead, Zillow's stock has mostly traded between $40 and $60 after a significant fall from its previous highs above $200 in early 2021. Bulls closely examine whether it can break out of this range and hit new heights. If it can close above $61.15, Zillow's stock could soar to levels above $78. But bears may push it back to the $40 mark if it stumbles again.

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This article Wedbush Upgrades Zillow to 'Outperform' With $80 Price Target – Is This The Signal To Buy In The Face Of A Shaky Housing Market? originally appeared on Benzinga.com