NEXT PICK · Market Insights
Zillow, which surged 11%, is a price-to-earnings ratio of 136 times still expensive?
Thursday, October 15, 2026
As soon as U.S. Treasury yields fell, Zillow surged 11% in a single day, but earnings kept fluctuating. This round felt more like a rate trade, not a fundamental turning point.
On October 15, Zillow ($Z) surged 11.05% in a single day without earnings reports or mergers and acquisitions, closing at $31.46, with trading volume expanding to 3.4 times the three-month daily average. The real driver was a macro figure: the 10-year U.S. Treasury yield fell from 5.1895% to 5.062%.
But looking back at the company's own books, its market value is $7.07 billion, with a price-to-earnings ratio (P/E) as high as 136.78 times. It just recorded a $4 million net loss in Q2, and its stock price is still more than 20% below the 200-day moving average. A single interest rate pause—can you support a company that is still fluctuating in profitability? This is exactly the question this article aims to answer in detail.
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Latest price
$31.46
▲ +11.05%
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Quantity ratio
3.4 times
▲ Compared to the daily average in March
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Distance from the 200-day moving average
$41.11
▼ -23.5%
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What exactly is the first stop for Americans when buying a house?
Zillow Group owns brands such as Zillow, Trulia, StreetEasy, ShowingTime, and dotloop, covering property displays, agent marketing, scheduled viewings, transaction management, and mortgage lending. Its business is divided into four areas: Residential, Mortgages, Rentals, and others.
FY2025 revenue was $2.58 billion, up 15.2% year-on-year, with net profit of $23 million, reversing FY2024's net loss of $112 million. EPS rose from -$0.48 to $0.09, and operating losses narrowed from -$197 million to -$34 million.
By Q2 2026, the revenue structure has quietly shifted: revenue of $772 million, up 18% year-over-year, with residential at $465 million growing only 7%, mortgages surging 75% to $84 million, and rentals up 31% to $209 million**. The new growth drivers are no longer in their traditional residential advertising.
Its irreplaceability comes from bilateral networks
Consumers rely on it to find properties, agents rely on it to find clients. CRM tools like Premier Agent and Follow Up Boss have become part of agents' daily workflows, but switching platforms means losing both client relationships and transaction data. The report rates this irreplaceability as 7/10.
If you compare U.S. real estate transactions to a shopping mall, Zillow is that main hallway everyone walks through—it doesn't sell houses, but collects rent from everyone who wants to put up a sign in the hallway. The question is, is the foot traffic in the corridor still growing? In Q2, the average monthly unique users were 239 million, with 2.5 billion visits, both down 2% year-over-year.
A 136x P/E ratio and a 23% EBITDA margin
On a GAAP basis, Zillow is shockingly expensive: live data shows a price-to-earnings ratio of 136.78, research reports calculate it as 143, and the enterprise value multiple (EV/EBITDA) is as high as 512.65. Meanwhile, the Nasdaq internet content sector's price-to-earnings ratio is usually between 20 and 30.
From the company's own perspective, the picture is different. Q2 adjusted EBITDA was $176 million, with a margin of 23% and adjusted EPS of $0.52; full-year guidance revenue was $2.92 billion to $2.96 billion, with adjusted EBITDA of $730 million to $760 million. For the same company, GAAP losses and adjusted high profits coexist, mainly separated by non-cash expenses such as equity incentives.
Cash flow is a more tangible support. Free cash flow (FCF) in FY2024 was $428 million; in FY2025, it dropped to $368 million; in Q1 2026 alone, it was $200 million, with a free cash flow yield of about 6.74%. At quarter-end, there was $682 million in cash and investments, plus a $500 million revolving credit facility due in 2031, and in Q2, $200 million was spent to repurchase 5.6 million shares.
The multi-scenario model in the research report tends to be conservative
The Conservative, Benchmark, and Optimistic scenarios correspond to market values of approximately $4 billion, $5.5 billion, and $7.5 billion, respectively. The DCF (WACC 10%, Sustainable Growth 3%) gives the company value at about $4.2 billion. According to this model, current prices are already close to the optimistic scenario, with a combined median premium of about 73%. The research report concludes that valuations are stretched.
So, does today's surge count as the realization of fundamental positive news? The answer is no. This rally did not add any new company-level information; it just changed interest rate expectations, and rates could reverse at any time. This round of gains reflects macro sentiment; earnings improvement itself has not yet been priced in.
Income during maturity, profit during adolescence
The report positions Zillow as a mature company: revenue of $2.58 billion, about 15% year-on-year, with a brand and user base built over more than a decade, long past the concept stage. But its profit and loss statement is not typical of a mature company: huge losses in FY2024, margin in FY2025, net profit of $46 million in Q1 2026, and another $4 million loss in Q2, with its profit model still evolving.
Does the market recognize this stage? The moving averages have already given the answer: the stock price is still slightly below the 50-day moving average of $31.95, 23.5% below the 200-day moving average of $41.11, and a 12-month return of about -57.5%. An 11% rise in one day only pulls the stock back near the moving average, not a reversal of the long-term downtrend.
A corridor, several street thieves
Redfin follows a proprietary brokerage route, differentiating itself by offering low commissions of 1.5% to 2.5% and full-time agents, but its revenue scale is much smaller than Zillow's, and it has been continuously losing money in recent years, with a P/S ratio of about 1 to 2 times. Opendoor offers instant quote buying (iBuyer), bearing the risk of price fluctuations itself, and cash flow efficiency has always been its challenge.
Compass focuses on high-end brokerage, attracting top agents through brand premium and tech tools; CoStar and RealPage are deeply involved in commercial real estate data and property management SaaS, and their areas overlap little with Zillow's residential sector, yet CoStar is still in legal battle with Zillow over photo rental copyright issues.
The difference in business models is what truly matters
Zillow mainly makes money through Premier Agent ad bidding, Redfin relies on commission commissions, and Opendoor relies on bid-ask price differences. Each competitor is stuck at a link in the transaction chain, but none can replicate the entire closed loop from search, viewing, contract signing to loan.
This year's regulatory turmoil has actually put this moat to the test of stress. On August 24, Zillow reached a settlement with the FTC and five states regarding Redfin's rental advertising cooperation, allowing the joint distribution partnership to continue, with the two companies offering independent multi-family residential advertising products starting in 2027; Compass's antitrust lawsuit was also withdrawn after its injunction application was rejected. Platforms targeted by regulators often indicate how important their position is in the industry.
Out of $2.5 trillion in transaction volume, Zillow took only a small portion
The research report's calculation is as follows
The U.S. residential market has an annual transaction volume of about $2.5 trillion, with a potential market estimated at a 2% technology penetration rate of about $50 billion; The rental market has an annual transaction volume of about $500 billion, with even lower penetration; Annual spending on digital advertising in real estate is about $5 billion. Zillow's actual serviceable market (SAM) is about $15 to $20 billion annually.
FY2025 revenue of $2.58 billion corresponds to a SAM penetration rate of 13% to 17%. The three-year forecast for FY2028 is $3.5 to $4 billion in revenue, with a compound annual growth rate of 12% to 15%, provided NAR rules are stable, interest rates are at mid-to-low levels, and AI products are successfully iterated; If the property market recovers more than expected, the upper limit could be raised to $4.5 billion. The company's guidance for this year's $2.92 billion to $2.96 billion is already positioned above this path.
What the bulls see is accelerated revenue and cash flow production
The bulls' logic doesn't depend on today's surge alone; they bet on continuously accelerating revenue and sustained cash flow, ultimately gradually digesting the high valuation multiple:
| ▲ Bull Case |
| ① | Quarterly revenue rose from $598 million in Q1 2025 to $772 million in Q2 2026, with year-over-year growth increasing from 2.9% to 17.9% |
| ② | Mortgage loan revenue grew 75% year-on-year, and home purchase loan a surge in volume doubled to $2.2 billion, with the closed loop being monetized |
| ③ | Rental revenue grew 31% year-on-year, multifamily business grew 42%, and high interest rates actually pushed more people toward renting |
| ④ | Q2 adjusted EBITDA margin was 23%, exceeding the upper end of guidance, with full-year adjusted EBITDA guidance of $730 million to $760 million |
| ⑤ | FY2025 free cash flow was $368 million, with $200 million repurchased in Q2, indicating a continuous shrinkage in equity |
| ⑥ | FTC settlement and Compass withdrawing lawsuits—two of the biggest legal suspense issues have already been resolved |
Bears see repeated profit and loss statements and peak flow
Bears do not deny that revenue is growing; their concerns lie in profit quality, flow trends, and cyclical risks—issues that cannot be solved even by a single rate rebound:
| ▼ Bear Case |
| ① | In Q2 2026, it will post a net loss of $4 million and an operating loss of $10 million, erasing the profitability of the first quarter |
| ② | GAAP P/E ratio is 136.78 times, enterprise value multiple is 512.65 times, with a very thin margin of safety |
| ③ | After improving operating margin from -8.80% in FY2024 to -1.32% in FY2025, the second quarter still stalled at -1.30%, with operating leverage still lingering |
| ④ | Monthly unique users and visits both declined by 2% year-on-year, indicating weaker core traffic |
| ⑤ | Revenue growth of around 15% has clearly slowed compared to the above 50% growth rate in FY2021 to 2022 |
| ⑥ | The most pessimistic estimate in the report suggests that the stock price still has more than 70% downside potential at a relatively reasonable value |
The earnings report three weeks from now will be even more critical than today's interest rates
Today's rise came from macro factors, but what will determine the direction of the stock price next are a few more specific factors:
| • | Q3 earnings report for early November: company guidance revenue of $745 million to $760 million, adjusted EBITDA of $180 million to $200 million, market consensus expectation of EPS of $0.25; Whether it can return to GAAP profitability will have a significant impact |
| • | U.S. Treasury yield trend: The 10-year yield is still above 5%. If it continues to fall, it could boost trading volume. If it turns upward, today's gains could be given back at any time, making the direction uncertain |
| • | The implementation of industry rules after the NAR settlement and the enforcement of listing property standards have significantly impacted the broker ecosystem |
| • | Whether Zillow Home Loans can achieve sustained profitability is positive, with a moderate impact |
| • | The Fed's rate-cutting cycle has driven trading volume up from late 2026 to early 2027, with a positive side and moderate impact |
| • | The launch of new products such as AI pricing and virtual house viewings has had less impact |
Every time profits improved, the market discounted them
From 2023 to 2024, Zillow was deeply in the red, with FY2024 revenue growth in single digits and its stock price under continued pressure. 2025 was a turning point: revenue grew 15.2%, the company turned profitable for the year, and the stock price rebounded above $40 at one point. Then, as profits turned negative again in Q2 2026 and valuation concerns intensified, the stock price fell steadily, drawing more than 40% from its 52-week high.
Looking back, the market has never been very convinced by Zillow's profit improvements, and each improvement is seen as unsustainable. Revenue growth rebounded from 5% to over 15%, losses have steadily narrowed, but these improvements have not been fully priced in by stock prices, which fluctuate more with interest rates and sentiment. Today's big bullish candlestick follows the same rhythm.
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⚠️ Risk Notice
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🟡 Neutral Revenue and cash flow are strengthening, but GAAP earnings have yet to stabilize, and the interest rate rebound does not represent a turning point |
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💬 Discussion Don't chase the rally based on interest rate rebounds; wait for the third-quarter report to verify; Post the real-time buy and sell positions on the official account |
Data source
| • | Source: NextPick real-time market snapshot, Zillow Group Q2 2026 earnings report and SEC 8-K filings, company earnings guidance, FTC announcements, and mainstream financial media coverage. |