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Company Report

CoStar's business is built around a proprietary database of commercial real estate information that the company has developed and enhanced for more than 35 years. This comprehensive database is by far the best in the industry and forms the bedrock for most of the products offered by the company. The company's proprietary data powers its analytic and information services and provides content for most of its online marketplaces.
Stock Analyst Note

Wide-moat-rated CoStar Group reported a good set of numbers in the fourth quarter as the firm reported non-GAAP earnings per share of $0.33, slightly higher than the FactSet consensus estimate of $0.32. Management guided for revenue to be in the $2.75 billion-$2.77 billion range for 2024, representing year-over-year growth of 12%-13%. Management now believes that 2024 will mark the peak in the investment cycle for the residential business of the company as it starts to monetize its marketplaces. The adjusted EBITDA for 2024 is expected to range from $170 million-$190 million as CoStar attempts to establish a leadership position in the residential segment.
Stock Analyst Note

We are reducing the Morningstar Uncertainty Rating for wide-moat-rated CoStar Group to Medium from High as we become more confident in the outlook of the residential business. CoStar has built industry-leading positions in its various business lines, and we believe that the updated Uncertainty Rating better reflects its risk profile and competitive positioning within the industry. The company is showing good progress in its residential initiative. We increasingly believe that the residential investments are strategically sound and that the company’s differentiated approach to monetizing its residential platform will be helpful in competing with the established players in the industry. We are maintaining our $76 per share fair value estimate for the firm.
Company Report

CoStar's business is built around its proprietary database of commercial real estate information that the company has developed and enhanced for more than 30 years. This comprehensive database is by far the best in the industry and forms the bedrock for most of the products offered by the company. The company's proprietary data powers its analytic and information services and provides content for most of its online marketplaces.
Stock Analyst Note

Wide-moat-rated CoStar Group's Homes.com business could be a beneficiary of the long-term implications of the jury decision in Sitzer/Burnett versus National Association of Realtors lawsuit. The jury in the class-action lawsuit found NAR and other co-defendants (which includes large brokerages) liable for around $1.8 billion in damages for keeping home-seller brokerage commissions artificially high. The plaintiffs in the case claimed that real estate commission rates for home sellers were inflated upward because of the industry structure where home sellers are required to pay commissions to realtors representing buyers. The result of this class-action lawsuit can potentially have a seismic impact on the buyer-side brokerage commission rule, which has been a fundamental feature of the residential brokerage industry in the U.S. for decades.
Stock Analyst Note

Wide-moat-rated CoStar Group reported a decent set of numbers in the third quarter as the firm reported non-GAAP EPS of $0.30, slightly higher than the FactSet consensus estimate of $0.29 per share. The company has maintained its full-year revenue guidance of $2.45 billion but has reduced its adjusted EBITDA guidance to $485 million-$490 million from $510 million-$520 million because of accelerated investments in its residential strategy. Management indicated that if the current market trends continue into the next year, then it expects revenue growth to slow to around 7%-8% in the first couple of quarters of 2024 but improve in the second half of the year. Management has guided for 11%-12% revenue growth in 2024 and over $1 billion in adjusted EBITDA from the commercial portfolio, which excludes the residential business.
Stock Analyst Note

Wide-moat-rated CoStar Group reported decent results in the second quarter as the firm reported non-GAAP EPS of $0.31, slightly higher than the FactSet consensus estimate of $0.30 per share. The company’s 2023 revenue guidance was lowered slightly to reflect the impact of lower property transaction volume on Ten-X, but the adjusted EBITDA guidance remained roughly similar. Overall revenue increased 13.2% on a year-over-year basis on the back of strong growth in the CoStar suite and multifamily segments. Annualized net new sales bookings which is an indicator of future revenue growth came in at $82 million for the second quarter, compared with $84 million in the same quarter of the last year. The adjusted EBITDA margins were recorded at 20.9% in the current quarter down from 29.6% in the second quarter of the previous year, largely because of the considerable residential investments of the company.
Company Report

CoStar Group’s business is built around its proprietary database of commercial real estate information that the company has developed and enhanced for more than 30 years. This comprehensive database is by far the best in the industry and forms the bedrock for most of the products offered by the company. CoStar’s proprietary data powers its analytic and information services and provides content for most of its online marketplaces.
Stock Analyst Note

The competition among residential marketplace incumbents like Zillow, Realtor.com, and Redfin remains fierce, but wide-moat CoStar is emerging as a new entrant in an already crowded space. The company has shown great progress in acquiring traffic on Homes.com and has already become the fourth-largest platform by traffic in the United States. The residential marketplaces in the U.S. have very distinct business models, with each model having its own set of advantages and disadvantages. CoStar's strategy is to challenge the incumbents through an advertisement-focused business model that is more agent-friendly and with better customer experience potentially leading to faster adoption. However, we find CoStar's model considerably more difficult to monetize compared with the one adopted by its larger competitors, Zillow and Realtor.com.
Stock Analyst Note

Wide-moat-rated CoStar Group reported a good set of numbers in the first quarter with non-GAAP EPS of $0.29, approximately 16% higher than the FactSet consensus estimate of $0.25 per share. The shares of the company were up about 5% in response to the quarterly results. Its 2023 adjusted EBITDA guidance remained roughly similar, but its non-GAAP EPS guidance increased by approximately $0.15 per diluted share to $1.21 to $1.24 per share from $1.06 to $1.09 per share. Most of the increase in non-GAAP earnings guidance was due to higher interest income expectations on the substantial amount of cash (about $5 billion) that the company holds on its balance sheet. Overall revenue increased 13.1% on a year-over-year basis on the back of strong growth in the CoStar Suite, multifamily, and LoopNet segments. Annualized net new sales bookings, which is an indicator of future revenue growth, came in strong at $80 million for the first quarter, an increase of 17% over the first quarter of 2022. The adjusted EBITDA margin was recorded at 21.0% in the first quarter, down from 34.4% in the first quarter of the previous year largely because of the firm's considerable residential investments. Overall, the first-quarter results were largely in line with our expectations, and we do not plan to change our $75 fair value estimate for CoStar Group.
Company Report

CoStar’s business is built around its proprietary database of commercial real estate information that the company has developed and enhanced for more than 30 years. This comprehensive database is by far the best in the industry and forms the bedrock for most of the products offered by the company. CoStar’s proprietary data powers its analytic and information services and provides content for most of its online marketplaces.
Stock Analyst Note

Wide-moat-rated CoStar Group reported middling results in the fourth quarter, but the 2023 full-year EBITDA guidance was substantially below Wall Street expectations because of the company’s higher-than-expected investments in its residential business. Management also said that the company will not be acquiring Move Inc., which is a majority owner of Realtor.com. The shares of the company tumbled by 5% in response to the quarterly results and the 2023 guidance.
Stock Analyst Note

News Corp. confirmed that it is engaged in discussions with wide-moat-rated CoStar Group regarding a potential sale of Move Inc., which is a majority owner of Realtor.com, the second biggest residential listing platform in the U.S. In our opinion, a potential deal will be a materially positive development for CoStar if the price tag for the deal is sensible. We are maintaining our $73 fair value estimate for the company as the deal has not been announced. We will re-evaluate our fair value estimate for the company if the transaction is finalized.
Company Report

CoStar’s business is built around its proprietary database of commercial real estate information that the company has developed and enhanced for more than 30 years. This comprehensive database is by far the best in the industry and forms the bedrock for most of the products offered by the company. CoStar’s proprietary data powers its analytic and information services and provides content for most of its online marketplaces.
Stock Analyst Note

Wide-moat-rated CoStar Group reported a decent set of numbers in the third quarter as the firm reported non-GAAP earnings per share of $0.30, 20% higher than the $0.25 in non-GAAP EPS during the third quarter of 2021. The company's shares gained 9% in response to the quarterly results. Overall revenue increased 11.6% on a year-over-year basis, and the adjusted EBITDA margin was recorded at 27.4% for the quarter. Annualized net new sales bookings, an indicator of future revenue growth, came in at $76 million for the third quarter, a 62% increase over the same quarter in 2021. Management has also increased its revenue and adjusted EBITDA guidance on the back of strong results with updated full-year revenue guidance of $2.175 billion to $2.180 billion and adjusted EBITDA guidance of $665 million to $670 million, representing an increase of $5 million and $48 million, respectively, at the midpoint of the range compared with previous guidance. The substantial increase in adjusted EBITDA guidance is mainly because of the lower investments in the firm’s residential business than previously anticipated. We are maintaining our $73 fair value estimate for Costar Group after incorporating the third-quarter results.
Stock Analyst Note

Wide-moat-rated CoStar Group reported strong results in the second quarter as the firm reported non-GAAP EPS of $0.28, 7.7% higher than the $0.26 in non-GAAP EPS during the second quarter of 2021. The shares of the company gained 12% in response to the quarterly results. Overall revenue increased 11.6% on a year-over-year basis and the adjusted EBITDA margin was recorded at 29.6% for the quarter. Annualized net new sales bookings, which is an indicator of the future revenue growth, came in at $84 million for the second quarter, a 66% increase over the same quarter in 2021. Management has also increased its revenue and adjusted EBITDA guidance on the back of strong results with updated full-year revenue guidance of $2.165 billion-$2.180 billion and adjusted EBITDA guidance of $610 million-$630 million representing an increase of $13 million and $20 million, respectively, at the midpoint of the range compared with previous guidance. We are maintaining our $73 fair value estimate for Costar Group after incorporating the second-quarter results.
Company Report

CoStar Group’s business is built around its proprietary database of commercial real estate information that the company has developed and enhanced for more than 30 years. This comprehensive database is by far the best in the industry and forms the bedrock for most of the products offered by the company. CoStar’s proprietary data powers its analytic and information services and provides content for most of its online marketplaces.
Stock Analyst Note

We are reducing our Uncertainty Rating for wide-moat-rated CoStar Group to High from Very High to align with our updated uncertainty rating methodology. CoStar Group has built industry-leading positions in its various business lines, and we believe that the updated uncertainty rating better reflects its risk profile and competitive positioning within the industry. Our reduced uncertainty rating also reflects our increased confidence in the company's aggressive residential investments. The company is showing good progress in its residential initiative, and we increasingly believe that the residential investments are strategically sound and the company’s differentiated approach to monetizing its residential platform will be helpful in competing with the established players in the industry.
Company Report

CoStar Group’s business is built around its proprietary database of commercial real estate information that the company has developed and enhanced for more than 30 years. This comprehensive database is by far the best in the industry and forms the bedrock for most of the products offered by the company. CoStar’s proprietary data powers its analytic and information services and provides content for most of its online marketplaces.
Stock Analyst Note

Wide-moat-rated CoStar Group’s first-quarter results were largely in line with our expectations as the firm reported non-GAAP EPS of $0.31, 14.8% higher than the $0.27 in non-GAAP EPS during the first quarter of 2021. Overall revenue was reported at $516 million in the first quarter, representing 12.6% growth on a year-over-year basis and 1.7% growth on a sequential basis. Adjusted EBITDA was recorded at $178 million for the quarter, representing 11.2% growth compared with a year ago. This translates into an adjusted EBITDA margin of 34.4% for the quarter. We are maintaining our $73.00 fair value estimate for Costar Group after incorporating the first-quarter results.

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