Overview
Jefferies raised its rating on CoStar Group to Buy from Hold on Friday and set a new price target of $67, down from $84. The upgrade accompanies a reassessment of Homes.com, the residential platform that has been central to investor debate and the companys recent strategic scrutiny.
Analyst rationale
Analyst Surinder Thind flagged investor debate around Homes.com as creating an appealing entry point, noting valuation sits at under 15 times normalized enterprise value to EBITDA. Jefferies also introduced proprietary analysis indicating that Homes.com will be successful, a view that underpins the firms forecast of a five-year revenue compound annual growth rate of 16%, which the firm says is above management guidance.
Valuation and recent trading
CoStar stock was trading at $49.07 after a 9% gain over the past week, though the share price remains down 44% over the last six months. Separately, InvestingPro analysis cited in the firms data shows that CoStar holds more cash than debt and reports a current ratio of 3.12. For investors seeking deeper company-level analysis, the Pro Research Report covering CSGP and more than 1,400 other U.S. equities is available from the firms research platform.
Financial trajectory and margin expectations
Jefferies projects a significant expansion in adjusted EBITDA margins, from roughly 12% in 2025 to more than 35% by 2030. The firm expects adjusted EBITDA to triple to $2.4 billion in 2030 versus 2026 guidance levels, with margins reaching about 36% in the same period.
On revenues, Jefferies forecasts $5.1 billion for 2028, which it positions above the companys guidance of $4.9 billion and consensus estimates of $4.7 billion. The firms 2030 EBITDA projection of $2.4 billion is also above managements guidance of $2.3 billion and market consensus near $2.0 billion.
Context: investment cycle and investor activism
CoStars stock has traded in a relatively narrow range over the past five years while the company completed its largest investment cycle to develop a residential business line. That multi-year spend, centered on Homes.com and related residential initiatives, has drawn criticism from activist investors and prompted strategic responses from the company.
In response to criticism from Third Point LLC, CoStar announced a $1.5 billion share repurchase program. The company also plans to cut investment in Homes.com by $300 million in 2026 and by more than $100 million annually thereafter, with the objective of bringing the platform to breakeven by the end of 2029.
Third Point has questioned CoStars roughly $5 billion investment in residential real estate initiatives, calling the effort poorly executed, and intends to nominate new directors to the companys board to push for strategic change. D.E. Shaw Group has similarly criticized CoStars capital spending focused on Homes.com and indicated plans to seek board changes at the 2026 annual meeting.
Company response and implications
CoStar has defended its strategy, highlighting strong subscriber growth for Homes.com and describing a shift from heavy investment toward scaling the platform. Management argues that abandoning the Homes.com initiative would damage the companys business and competitive position. The ongoing exchange between management and activist shareholders underscores heightened scrutiny over capital allocation and strategic priorities.
Key takeaways
- Jefferies upgraded CoStar to Buy and set a $67 price target, citing Homes.com upside and attractive valuation metrics.
- The firm forecasts a five-year revenue CAGR of 16% and a tripling of adjusted EBITDA to $2.4 billion by 2030, with margins expanding to the mid-30s percentage range.
- Activist pressure has already prompted a $1.5 billion buyback and planned reductions in Homes.com investment, but investor disagreement over the residential strategy continues.
Sector impact
- Real estate listings and proptech platforms - strategic and capital allocation questions around residential market expansion.
- Financial markets - activist engagement and buyback activity influence investor sentiment and valuation dynamics.
Risks and uncertainties
- Execution risk on Homes.com - the firms projections rest on the platform achieving the growth and margin profile Jefferies assumes.
- Investor activism - ongoing pressure from Third Point and D.E. Shaw could lead to board changes or strategic shifts that alter stated plans and capital allocation.
- Capital allocation and pacing of investment cuts - reductions in Homes.com spending are planned, but the ultimate effect on revenue growth and timing to breakeven is subject to uncertainty.
The situation remains dynamic: Jefferies is optimistic about the residential business trajectory and margin improvement, while activists and some large investors press for faster capital discipline and governance changes. How those tensions play out will influence CoStars ability to translate its investment cycle into sustained profitable growth.