After months of relentless selling, shares of Zillow Group Inc (NASDAQ: ZG) have quietly done something they haven’t managed in weeks. ZG stock just posted three straight days of gains. That may not sound dramatic, but in the context of a nearly 50% collapse and extreme bearish sentiment, it’s worth noting.
Shares now trade around $45, effectively back to where they were in 2014, with nearly two years of gains wiped out over the past five months alone. A sluggish housing market, thanks to elevated mortgage rates over recent months, and a dodgy report last week, has done the stock no favors. Yet with sentiment about as bad as it can get, and price action showing signs of stabilizing, could this run of green days be the start of something?
The latest earnings report may have accelerated the decline, but it didn’t start it; Zillow shares have been under pressure since September. The thing is, though, last week’s results were far from disastrous. Sure, earnings missed by a few cents, but revenue not only came in above expectations but showed 18% year-on-year growth.
Adjusted EBITDA also increased year-over-year, and margins expanded, helping the company achieve full-year profitability. The chart might not look great, but this is not the report you’d expect from a business in terminal decline.
One of the standout themes from the quarter was strength in rentals. That segment delivered strong growth, particularly in multifamily, and management expects continued expansion into next year. Rentals have become a critical pillar of Zillow’s diversification strategy.
Mortgage revenue also expanded meaningfully, which reinforces Zillow’s broader evolution into an integrated ecosystem spanning buying, selling, renting, and financing. The strategy is increasingly about capturing value across the entire moving journey rather than relying solely on listing fees.
Part of the recent plunge reflects anxiety around AI disruption and private listing networks. Many investors fear that AI-powered housing portals could undermine Zillow’s dominance. Indeed, this is a trend that is not just focused on Zillow or its peers, but the wider tech space.
But consumer behavior suggests Zillow is set to remain the default destination for home search for the foreseeable future. Competitors might be spending aggressively to gain share, but they’ve had limited success so far.
All that being said, Zillow is still facing an uphill battle in the near term. The broader U.S. housing market remains near a cyclical trough due to elevated mortgage rates and affordability constraints. Transaction volumes are subdued, creating a challenging backdrop for any real estate-linked platform.
However, cyclical troughs can also create opportunities for those of us on the sidelines who like to feel they’re getting a bargain. When transactions normalize and the market ticks up again, Zillow’s diversified revenue base and solid margins should set it up for success. At current price levels, the market appears to be pricing in prolonged stagnation, which may prove overly pessimistic.
Technically, the stock is deeply oversold, which supports the case for buying the dip. Zillow’s relative strength index (RSI) currently sits around 24, its lowest reading in more than a decade. That signals extreme selling pressure that rarely persists indefinitely without at least a relief rally.
To that point, while this week’s three-day run of gains doesn’t confirm a full reversal, it does suggest that selling pressure may be starting to exhaust itself. When multi-year lows coincide with extreme oversold readings and improving price action, contrarian investors take notice.
Analysts are also starting to point this out, with the team over at Piper Sandler reiterating its Overweight rating last week. They also gave Zillow stock a fresh $70 price target, implying more than 50% in potential upside from current levels.
Any stock exiting a 50% slide carries a certain level of risk, and Zillow is no different. If mortgage rates remain elevated for an extended period and housing continues to stagnate, earnings could remain pressured. The market’s reaction to last week’s miss and guidance warning from management suggests investors will be particularly sensitive to any signs of slowing momentum or weak guidance in the quarters ahead.
But if you’re willing to stomach that risk, the opportunity might be too hard to pass. A combination of improving price action, extremely oversold technicals, continued revenue growth, and analyst upside creates a compelling story. Expectations are low, sentiment is washed out, and the stock sits at decade-old price levels.
Three consecutive up days may not prove that the bottom is in. But after a 50% slide, it may be one sign that the market is now looking at Zillow with fresh eyes.
