Barclays has shifted its view on Zillow, upgrading the residential real estate marketplace operator from Underweight to Equal Weight and raising its price target to $72 from $66. The bank's move reflects growing confidence in Zillow's ability to execute, though it also acknowledges that affordability, legal disputes, policy uncertainty and competition remain unresolved risks for the company.
Zillow has delivered mid-teens revenue growth alongside mid to high-20s adjusted EBITDA growth for two consecutive years despite a weak backdrop for residential housing activity. Looking ahead, Zillow itself has outlined expectations for mid-teens revenue growth and roughly two points of EBITDA margin expansion, targets Barclays says inform investor focus into 2026 even as sentiment around the stock has softened.
Valuation and estimates have shifted in recent months. Barclays notes that valuation multiples have compressed by about 6% and that consensus earnings estimates have moved little. The bank attributes some of the multiple compression to investor concerns over competition, litigation and housing policy rather than to deterioration in Zillow's reported operating performance.
On near-term results, Barclays expects Zillow's fourth-quarter performance to be broadly in line with expectations. The bank projects U.S. residential transaction volumes to rise about 3% year on year in the quarter, a pace slightly slower than the prior quarter. While Barclays describes the housing market as stable, it says there is not yet a clear inflection point, with activity continuing to "bounce along the bottom."
Barclays believes that investors will increasingly look past short-term quarterly outcomes and toward the foundational elements that could drive 2026 growth and margin expansion. In that context, the bank highlights faster growth in rentals and in newer product initiatives such as Zillow Pro as potential offsets to concerns that Zillow's performance might vary relative to broader housing trends.
To explain its more constructive stance, Barclays outlined three main factors. First, Zillow's track record of outperforming transaction volumes over the past two years has bolstered confidence in its execution. Second, competitive pressure appears to be easing after Costar Group said it would sharply reduce investment in Homes.com from 2026. Third, valuation looks more reasonable in Barclays' view: Zillow is trading at about 17x the bank's 2027 EBITDA estimate, while Barclays projects about 22% EBITDA growth in 2026.
Despite the upgrade, Barclays cautions that the timing and shape of a housing recovery remain unclear. The bank notes that extended periods of weak existing home sales can lead buyers to adapt to higher interest rates, which over time may set conditions for eventual improvement. Against that uncertainty, Barclays judges Zillow's risk-reward profile to be more evenly balanced at the start of 2026.
Key points
- Zillow upgraded to Equal Weight from Underweight; price target raised to $72 from $66.
- Company posted mid-teens revenue growth and mid to high-20s adjusted EBITDA growth for two straight years despite a weak housing backdrop.
- Barclays cites execution, reduced competitive pressure after Costar's pullback on Homes.com, and a valuation around 17x 2027 EBITDA as reasons for a more constructive view.
Risks and uncertainties
- Ongoing housing market headwinds - persistent affordability issues and the lack of a clear housing inflection could limit demand and pressure the residential real estate sector.
- Legal and policy risks - litigation and policy uncertainty remain open factors that could affect Zillow's operations or investor sentiment.
- Competitive dynamics - while some competitive pressure may be easing, competition in listings and related services remains a potential challenge for the consumer real estate marketplace sector.