Citi Raises CoStar Group Target to $97, Foresees Downside Risk
Increased Price Target and Negative Catalyst Watch for CoStar Group
Citi has raised its price target for CoStar Group (NASDAQ:) to $97 from $90, maintaining a Buy rating. The firm has initiated a 30-day Negative Catalyst Watch on CoStar, signaling potential downside risks. Citi’s analysis suggests that CoStar may invest more heavily than anticipated, particularly in its Residential segment, which is estimated to be two to three times larger than its Apartments segment.
Anticipated Increased Investment Spending and Potential Stock Performance
Citi foresees increased investment spending on CoStar’s Homes.com platform for fiscal year 2024, possibly leading to an EBITDA margin around 18%, below consensus estimates. Despite potential stock declines if EBITDA margin expectations are not met, Citi notes that such situations could present buying opportunities, citing a similar scenario in 2016 that resulted in a significant stock value increase over the following 12 months.
InvestingPro Insights and Tips for CoStar Group
CoStar’s market capitalization stands at $34.65 billion, reflecting the significant scale of its operations. Despite a high P/E ratio, the company’s financial health appears solid, with sturdy cash flows and a financial buffer to cover interest payments. Additionally, CoStar’s liquid assets exceed its short-term obligations, while its revenue growth remains robust, with a 12.88% increase in the last twelve months as of Q3 2023.
Opportunities for Investors and Company’s Strong Financial Position
While there are potential concerns about increased investment spending, CoStar’s financial data and expert analysis on InvestingPro present a picture of a company with a sturdy foundation and a strategic approach to growth. Investors can leverage InvestingPro’s tips for in-depth analysis when considering CoStar’s stock. By using the coupon code SFY24 for a 2-year InvestingPro+ subscription or SFY241 for a 1-year subscription, they can get an additional 10% off to unlock more insights for informed investment decisions.
Overall, Citi’s stance reflects a positive long-term outlook on CoStar’s performance, suggesting that any potential stock pullback could be temporary and may offer an attractive entry point for investors as the company’s execution on Homes.com becomes more evident throughout 2024.
